2011 Trade Policy Assessment Maine Citizens Trade Policy Commission September 16, 2011 Robert...
-
Upload
bridget-lynch -
Category
Documents
-
view
214 -
download
1
Transcript of 2011 Trade Policy Assessment Maine Citizens Trade Policy Commission September 16, 2011 Robert...
2011 Trade Policy AssessmentMaine Citizens Trade Policy Commission
September 16, 2011
2011 Trade Policy AssessmentMaine Citizens Trade Policy Commission
September 16, 2011
Robert StumbergGeorgetown University Law Center
Harrison Institute for Public Law
2
Roadmap
1. Introduction a. Overview – trade and investment
agreementsb. Current – Trans-Pacific Partnership
Agreementc. Which agreements affect states?d. How people use trade rules
2. Trade rules that affect statesa. Pharmaceutical trade rulesb. Limits on regulation of servicesb. Foreign investor rights
3.Example – treatment of tobacco in FTAs
1. Introduction a. Overview – trade and investment
agreementsb. Current – Trans-Pacific Partnership
Agreementc. Which agreements affect states?d. How people use trade rules
2. Trade rules that affect statesa. Pharmaceutical trade rulesb. Limits on regulation of servicesb. Foreign investor rights
3.Example – treatment of tobacco in FTAs
3
Overview of trade agreements
U.S. Trade Agreements in Force
WTO – 153 nations
FTAs - 17 nationsBITs - 39 US treaties
20 agreementsTrade disputes - yesInvestor disputes - noOngoing negotiations - yes
20+ chaptersTrade disputes - yesInvestor arbitration - yesOngoing negotiations - yes
Single functionTrade disputes - noInvestor arbitration - yesOngoing negotiations - yes
4
5
Which agreements affect states?
AgreementsAgreementsTrade RulesTrade Rules
GoodsGoods ServicesServices Procure-Procure-mentment SubsidiesSubsidies InvestmentInvestment
WTO AgreementsWTO Agreements xx xx xx xxFree Trade AgreementsFree Trade Agreements xx xx xx xxBilateral Investment Bilateral Investment Treaties Treaties xx
6
Intro - How people use trade rules
Trade rules that limit government authorityTrade rules that limit government authority
State laws that affect trade
Legal use of trade rules (rare)• Threat of trade sanctions• Investor compensation• Domestic enforcement / preemption
Political use of trade rules• Lobbying by federal officials• Lobbying by foreign governments• Lobbying by private firms
Pharmaceutical trade rules
Australia and Korea FTAs – models for TPPA
Reimbursement policies – must be based on “competitive market-derived” prices
Problems
• States use preferred drug lists to reduce prices 50% (Maine)
• Affordable Care Act is moving to reference pricing
Coverage –programs operated by central government
Carve-out for federal-state partnerships?
• Medicaid – yes
• Medicare Part B – no statute defines pharmaceutical prices
• Sec 340B Fed. Public Health Act – no statute defines discounts for federally funded clinics
7
Alcohol distributionAlcohol distribution
Electric power - delivery & controlElectric power - delivery & control
Civil engineeringCivil engineering
ConstructionConstruction
Financial services Financial services
GamblingGambling
Hospital servicesHospital services
What does GATS cover?90 U.S. commitments from A-to-Z
Health insuranceHealth insurance
Higher education and researchHigher education and research
Mining servicesMining services
Pipeline transport & storage of fuelsPipeline transport & storage of fuels
Tobacco distributionTobacco distribution
Urban planningUrban planning
Waste managementWaste management
What are GATS rules?
Market AccessNo quantitative limits
National TreatmentNo discrimination
Domestic Regulation70 proposed “disciplines”
Notquantitative limits
Notdiscriminatory
Market AccessNo quantitative limits
Domestic Regulation70 proposed “disciplines”
National TreatmentNo discrimination
Notquantitative limits
Notdiscriminatory
What are GATS rules?
11. [Domestic regulations] . . . shall be pre-established, based on objective and transparent criteria and relevant to the supply of the services to which they apply.”
Proposed GATS “disciplines”Proposed GATS “disciplines”Article 11 - applicable to all covered Article 11 - applicable to all covered sectorssectors
Proposed GATS “disciplines”Proposed GATS “disciplines”Article 11 - applicable to all covered Article 11 - applicable to all covered sectorssectors11. [Domestic regulations] . . . shall
be pre-established, based on objective and transparent criteria and relevant to the supply of the services to which they apply.”
Each term is ambiguous. Each term is ambiguous. Each hasEach has
Benign meanings andBenign meanings and
Radical meaningsRadical meanings
Locate near infrastructureProvide storage capacity
Most relevantto service
Least relevant to service
Intrinsic to serviceIntrinsic to service External to serviceExternal to service
Licensing of ports, refineries, industrial facilities
Preserve environmentPreserve coastal access
Conserve historic valuesPreserve scenic vistas
RelevanceMeasures ... shall be ... relevant to the supply of the services to which they apply.
13
Foreign investor rights
ExpropriationFair and equitable treatmentMost-favorable treatment
14
Example – Treatment of tobacco in FTAs
Trade agreements serve and protect tobacco with the benefits enjoyed by every other sector
• How do trade negotiators treat the outliers – the industries that unavoidably threaten public health?
• If tobacco succeeds in using trade agreements to protect its market share from new forms of regulation, then any industry will be able to.
15
Prohibitions on promoting tobacco trade
U.S. law prohibits trade negotiators from promoting tobacco trade
• Doggett Amendment“Funds shall not be available to “promote the sale or export of tobacco or tobacco products, or to seek the reduction or removal by any foreign country of restrictions on the marketing of tobacco or tobacco products, except for restrictions which are not applied equally to all tobacco or tobacco products of the same type.”
16
U.S. negotiators have exceeded their authority
U.S. FTAs provide tobacco companies with benefits that only an FTA can provide:
• Investor-state arbitration to challenge other countries’ tobacco controls
• Outside of domestic courts
• Using investor protections not available under domestic law
• Trademark protections in foreign markets
• Expanded limits on non-discriminatory government regulation
• Necessity test for regulation of goods
• Emerging limits on cross-border distribution services
• Tariff reductions for specific tobacco products
17
Tariff reductions are obvious
U.S. FTAs with Peru, Singapore, Chile, Australia
CigarettesCurrent status FTA commitment
WTO bound tariff – $1.05/kg + 2.3%
Peru – zero tariff eliminated
Singapore – 13.1¢/kg + 0.2% staged elimination
Chile – 13.1¢/kg + 0.2% staged elimination
Australia – 42.0¢/kg + 0.9% staged elimination
18
Tariff reductions are obvious
U.S. FTAs with Peru, Singapore, Chile, Australia
Processed tobacco leaf – other than cigarettes
Current status FTA commitment
WTO bound tariff – 37.5¢/kg
Peru zero tariff lock in zero
Singapore – 4.6¢/kg staged elimination
Chile – 4.6¢/kg staged elimination
Australia – 15.0¢/kg staged elimination
19
Less obvious
Trade and investment rules that protect tobacco marketing
• Example – PMI describes Singapore’s standard for banning marketing terms as “overly broad” discretion, which PMI says could –
• “lead to violations of the TBT Agreement”
• “threaten to violate existing … agreements with the U.S.” and
• “undermine international investment, TBT and IP rights”
• Singapore’s standard – The Minister of health may ban use of“any term, descriptor or trade mark, or any figurative or other sign, that directly or indirectly creates the false impression that a particular tobacco product is less harmful than other tobacco products.”
• Compare to the U.S. standard:“The Secretary may … require restrictions on … the advertising and promotion of, the tobacco product, if the Secretary determines that such regulation would be appropriate for the protection of the public health.”
20
• Uruguay prohibited deceptive cigarette brands – “light” and “low tar.”
• Tobacco companies shifted to colors – Marlboro Reds, Blue, Gold.
• Smoking rates stayed high, so Uruguay limited companies to
• A single brand• 80 percent package warning • Pictographs of severe health
effects
Less obvious still – Investors are using trade rules
Among PMI’s arguments –
• Uruguay violates fair & equitable treatment and WTO/TRIPS obligations.
• Under the BIT’s umbrella clause – Uruguay must “observe the commitments it has entered into with respect to the investments of Swiss investors.”
• Commitments include obligations under TRIPS.
Philip Morris International filed investor arbitration – Switzerland-Uruguay BIT
• Investors’ lawyers aim to privatize trade litigation.
• Incorporating trade rules could lead to “vast” expansion of trade litigation.
• Multiple investment clauses could link investors to trade rules.
Lessons from the Marlboro Man v Uruguay
• TBT necessity tests
• TRIPS trademark protections (“IP rights are private rights”)
• GATS limits on domestic regulation (“commercial presence” of subsidiaries)
• Example – proposal that governments must ensure that regulations are not more burdensome than necessary.
Which trade rules are investors trying to use?
BIT law WTO law
• Minimum standard of treatment (fair and equitable treatment). Ensure compliance with customary international law (CIL) – debatable scope.
• International law clauses. Ensure treatment “in accordance with international law” – not limited to CIL.
• Umbrella clauses. Observe “any obligation” with regard to investments.
• More favorable treatment clauses. If another agreement between the parties provides “more favorable treatment” of investments, it will prevail.
• Most-favored nation treatment. Ensure the most favorable treatment provided to investors from any third country. If the expansive clauses above are not available, MFN incorporates them from any third-party BIT.
Which investment clauses might incorporate trade rules?
Most investment agreements (FTA chapters or BITs) have clauses that are designed to incorporate obligations from outside of the
agreement.
Hypothetical TPPA invest. chapter
No expansive treatment clauseTPPA
investmentclaim
NZ investor
MalaysiaMalaysia
MFN
BelgiuBelgiumm
Malaysia-Belgium BIT:
Yes “international law” clause
MFN links to clauses in third-part BITs
How might MFN expand protection of foreign investors?Even if the TPPA avoids expansive clauses (international, umbrella, more favorable, etc.), MFN could incorporate similar clauses from older third-party BITs. Examples:
United StatesArgentina BIT 1994 International law
Ecuador BIT 1997 Umbrella clause
AustraliaArgentina BIT 1997
More favorable / bilaterals
Australia-US bilateralTRIPS-plus protections
ChileUnited Kingdom BIT 1997
International law
MFN ConnectionsUnder BITS and FTAs
UNCTAD
Potential TPPA reforms
• Be wary of half-measuresMany reforms proposed for the TPPA have value, but they are half measures.
• Carve-out of tobacco from the investment chapter
This solution leaves in place the risk of state-to-state disputes under several trade chapters.
• Health exceptions for all chapters – Health exceptions would help safeguard domestic regulations, but the standard language includes a necessity test that shift the burden of proof to defending governments.
• Limits on investor protections – Clear limits on investor protections are essential, but they leave in place the risk of state-to-state disputes under several trade chapters.
29
Potential TPPA reforms
• Adopt effective reforms in the TPPAThree reforms do not suffer from uncertain interpretation or only partial coverage of TPPA chapters.
• Carve out tobacco A complete carve-out of tobacco would de-fuse the TPPA as a threat to tobacco controls.
• Exclude investor-state remedies
• As emphasized by Australia, investor claims could threaten a wider class of public health measures.
• Tobacco controls may save more lives than other health measures, but that does not justifyprotecting only tobacco controls from the threat of investor arbitration and trade disputes.
30
31