U.S. LAW & GLOBAL TRADE
Dr. Stuart S. Malawer
Dr. Malawer, J.D. Ph.D. (2016)
1
Outline of Topics.
•
•
•
•
•
•
•
•
Extraterritoriality.
– Notes: Multi- jurisdiction & Corporate Structure.
– Branch v. Subsidiary.
– Boycott & Corrupt Practices.
– U.S. Taxation: Worldwide System & Tax Deferral.
Exports & “Reexports”(Technology & Encryption)
Import Relief & Controls.
Retaliation (Section 301).
Trade Sanctions.
Trade Agreements (Constitutionality)
“Fast Track Authority (TPA).”
Uruguay Agreements (1995) & Doha Negotiations.
Dr. Malawer, J.D. Ph.D. (2016)
2
1. EXTRATERRITORIALITY.
Dr. Malawer, J.D. Ph.D. (2016)
3
Extraterritoriality: Basic Dilemma
• Potential Regulation by Two Governments – Often lawful under
foreign law & unlawful under U.S. law.
Can the U.S. & EU regulate the
When does U.S. law apply?
foreign branch or subsidiary?
EU Applies --
U.S.
Branch /
Corporate Group
U.S. Parent
EU
Subsidiary
“Clash of competing
legislation” as to foreign actors
,foreign actions & foreign law.
Dr. Malawer, J.D. Ph.D. (2016)
4
Note -Transnational Transactions & Multi-jurisdictional World.
– Private Transactions & Transnational Regulation -
EU
U.S.
- ISSUE Third Country
Dr. Malawer, J.D. Ph.D. (2016)
•Global transactions occur in
many countries, but each
country has own rules, e.g.,
antitrust, export controls,
sanctions ….. Not much
global regulation.
5
Note –
Corporate Structure & Corporate Groups.
Corporation
(Separate Entity / Depends on Incorporation)
[Provides limited liability of shareholders -Liability only on the corporation.
Fosters capital formation.]
Shareholders
(Equity Owners)
Parent Corporation
(As a shareholder limited liability -no liability for subsidiary)
Subsidiary Corporation
(Parent is shareholder / control of
corporation)
Note – In a General Partnership all partners are
individually liable for partnership debts -- no limited
liability. Different from corporate organization.
Dr. Malawer, J.D. Ph.D. (2016)
6
Extraterritoriality:
“Clash of Competing Antitrust Laws ”
(Domestic Mergers)
U.S.
U.S. antitrust rules
EU
Merger impact on
European &
global markets
(assets w / in those
markets).
Citicorp
EU Regulation
Merger
European
antitrust
rules
Travelers
•Financial Services
MCIWorldCom - Sprint (2000)
•Telecommunications & Internet
Northrop Grumman – TRW (2002)
•Defense industry
GE-Honeywell (2001)
Dr. Malawer, J.D. Ph.D. (2016)
7
Extraterritoriality – Mergers &
Other Regulatory Issues.
U.S.
Antitrust &
other
regulatory
rules for
specific
industries
(e.g. FCC)
WorldCom
E.U.
Merger
MCI
• Industry specific & other regulations.
• Recent Mergers or Proposals:
•AOL-Time Warner
• GE-Honeywell
•Deutsche Telekom – VoiceStream
•NTTDoComo – Verio
•Lucent – Alcatel.
Dr. Malawer, J.D. Ph.D. (2016)
8
Extraterritoriality
(Transborder Mergers /Alliances)
U.S.
Competing
Laws &
Regulations
U.K.
AT&T
BT
Alliance
U.K. Company
U.S. Company
Auto: Daimler-Benz / Chrysler (1998)
Oil:
BP - Amoco (1998)
Aviation: American Airlines - British Airways
Financial: Deutsche Bank - Bankers Trust; Credit Suisse
– DLJ.
Dr. Malawer, J.D. Ph.D. (2016)
9
Extraterritoriality --Corporate Governance.
(Sarbanes –Oxley Act 2002)
•SOX federalizes corporate governance (from state law) & applies extraterritorial –
when have listed foreign firms.
•Corp. Governance – Newer trade issue. From a state law issue, to a national issue,
now a global trade & business issue (particularly U.S. - EU).
U.S. Law
EU
U.S.
(Auditor)
[Selling shares in U.S.]
(Listed)
•U.S. securities law requires registration
•EU auditing firm auditing another EU firm listed in U.S.
with oversight board (PCAOB) & may
have penalties.
•Enhanced financial disclosures.
•Criminal penalties for fraud & white-collar crimes.
•Personal liability of senior executives.
•Oversight of public accounting firms.
Dr. Malawer, J.D. Ph.D. (2016)
10
Dual Principles Concerning
U.S. Extraterritorial Legislation:
“Effects Principle” & “Principle of Reasonableness”
U.S.
Effect w/in U.S.
Extraterritorial Application of U.S.
“Effects Principle”
Law (e.g. antitrust, mergers,
alliances and contracts)
World
Act outside of
U.S.
(by foreign actor)
S. malawer @ 2002
“Effects Principle” now qualified
by “Reasonableness Principle”
(both international & U.S. law)
Dr. Malawer, J.D. Ph.D. (2016)
11
2. EXPORT & “REEXPORT” CONTROLS.
U.S. Department of Justice
United States Attorney Western District of Virginia
THE GUILTY PLEA OF ITT CORPORATION FOR
ILLEGALLY TRANSFERRING CLASSIFIED AND
EXPORT CONTROLLED NIGHT VISION TECHNOLOGY
TO FOREIGN COUNTRIES
-- $100 Million Fine -March 27, 2007
Dr. Malawer, J.D. Ph.D. (2016)
12
Export Control’s Legislation.
• Export Administration Act & related acts (1979), (1985), (1988)
provide for a range of export controls.
•Basic Law -- Export Administration Act of
1979 (foreign policy & national security
controls). Applies to both goods & technology.
•Note -- This law reaches foreign technology
sold by U.S. subsidiaries abroad.
(Extraterritoriality).
•Possible violations of Economic Espionage
Act of 1996 if involves transfer of a trade
secret to a foreign government.
Dr. Malawer, J.D. Ph.D. (2016)
13
Export & “Reexport” Controls.
E.g., Chinese Satellite
/ Missile Technology
U.S.
* Export controls govern
both goods & technology
Export
‘Foreign Origin’
‘U.S. origin’
For. Co.
EU
Subsidiary
Reexport
Russia
Dr. Malawer, J.D. Ph.D. (2016)
14
COMPUTER EXPORTS & U.S. CONTROLS
--The Case of IBM & Russian Sales --
IBM / Parent
Criminal violation by IBM
Subsidiary (1998)
P/S
Sales & Installation Contract
IBM
Russian Sub.
Russian Corp.
Offshore production ?
Seller
Buyer
Dr. Malawer, J.D. Ph.D. (2016)
15
Network Associates, Inc.
U.S. Parent
‘Encourages’ offshore
development (Contract or
P/S
Marketing or Production
also?
Alliance)
Dutch
Subsidiary
Swiss Corp.
(Cnlab Software)
Software
[Foreign origin or
publicly available
program code]
European Sales
Europe
Malawer @1998
Dr. Malawer, J.D. Ph.D. (2016)
16
U.S. EXTRATERRITORIAL: LEGISLATION
-- Unrelated Firm, Branch v. Subsidiary -•
•
•
•
•
•
Antitrust (also unrelated firms)
Securities legislation (also unrelated
firms)
Taxation (branches / subsidiaries)
Commercial Corruption (not foreign
subsidiaries)
Foreign Boycotts (foreign
subsidiaries)
Note: Branch v. Subsidiary
– Branch is part of U.S. firm.
– Foreign subsidiary is
incorporated in foreign
country. (It is a foreign
corporation.)
– Foreign subsidiary has
controlling equity ownership
by U.S. parent.
– U.S. Taxation: No tax on
foreign subsidiary until
repatriated. Tax on branch
(maybe tax credit).
Dr. Malawer, J.D. Ph.D. (2016)
17
Foreign Branch & Foreign Subsidiary:
Extraterritorial Application of U.S. Law.
U.S. Law.
U.S. Law.
U.S.
Corporation
U.S. Parent
Corporation
Maybe.
Yes.
Equity Ownership.
Foreign
Subsidiary
Separate
corporate
entity.
Incorporated
in foreign
country.
Dr. Malawer, J.D. Ph.D. (2016)
Foreign
Branch
Part of
corporation.
No separate
ownership
or entity.
18
Antiboycott & Corrupt Practices:
Extraterritorial Application – Foreign Subsidiaries.
Antiboycott Law
Corrupt Practices Law
U.S. Law.
U.S.
Parent
Corp.
U.S.
Parent
Corp.
Yes
No
Foreign
Subsidiary
Foreign
Subsidiary
• Applicable to branch.
Dr. Malawer, J.D. Ph.D. (2016)
19
U.S. Corporate Taxation: Multinational Global Corporations -- Worldwide System & Tax Deferral
[Extraterritoriality & Related Problems.]
General Rule -- U.S. taxes foreign income of corporations. This involves
issues of double taxation, foreign tax credits, tax treaties and tax havens .
Also involves issue of transfer-pricing as to where to take corporate profits.
U.S. Firm
For. Buyer
U.S. taxes foreign source income.
U.S. WORLDWIDE TAX SYSTEM
EXPORT TAX DEFERRAL & EXPORT SUBSIDY
U.S. Parent
Export sales income
U.S. Firm
For. Subsidiary
No U.S. income tax on
foreign subsidiary’s income
until repatriated back to
U.S.
Foreign income
No U.S. income tax (deferral) on
foreign sales / export income of
U.S. firm. Problem of the DISC
and FSC legislation. WTO
decisions against this.
* Obama proposal to change tax deferral on foreign income / transfer pricing. Considering temporary reduction of
repatriation of overseas income to help spur domestic growth and employment. In addition to this cross-border tax evasion
and tax havens are major concerns. The new policy for greater information exchange via OECD provisions is supported
by the G-20 to limit tax evasion that utilizes bank secrecy laws. The OECD produces both model conventions and
proposals for national standards – a dual approach --- creating international obligations & “harmonizing” national
legislation.
Dr. Malawer, J.D. Ph.D. (2016)
20
3. IMPORT RELIEF LEGISLATION.
Dr. Malawer, J.D. Ph.D. (2016)
21
“Unfair” & “Fair” Import Relief.
“Unfair”
“Fair”
301
A/D
CVD
337
1337
201
406
22
232(B)
204
Dr. Malawer, J.D. Ph.D. (2016)
22
Import Relief: “Trigger Mechanism.”
•
•
•
•
•
•
A/D. Dumping. (sale in the U.S.
for LTFV -- less than FMV &
material injury)
CVD. Subsidies. (foreign export
subsidy & material injury)
337 (unfair acts of importation or
competition– violation of patents
& trademarks)
*Procedural Note -- Injury / ITC;
Wrongful Act / ITA.
Remedy Note – Remedy is
generally a tariff surcharge.
•
•
•
•
201 “Escape Clause.” (substantial
cause of serious injury)
406. (market disruption)
(communist).
22 “Agriculture.” (materially
interfere w/ USDA)
301. Retaliation. (USTR: unfair or
illegal foreign trade practices).
Market access.
– Special 301 (Intellectual
Property Rights).
– Section 1376 (telecom).
232b (Commerce: impair national
security).
Dr. Malawer, J.D. Ph.D. (2016)
23
Antidumping (LTFV)
[Private party price discrimination.]
(Sales Price less than FMV in foreign country.)
German Firm
U.S.
(Unfair
Practice)
Sales Price in U.S.
(Lower in the U.S.)
Remedy – ADD (tariff surcharge)
equal to margin of dumping
Sales Price in Germany
(Higher in Germany)
• Predatory price discrimination with intent to gain market share.
• Statute protects domestic manufacturers, not consumers.
• Traditional economists concerned about monopoly .
Dr. Malawer, J.D. Ph.D. (2016)
24
Countervailing Duty (Export Subsidies)
German Gov’t
[Foreign Government Export Subsidy]
Gov’t Subsidy
U.S.
(Unfair
Practice)
REMEDY NOTE
German Firm
Sale to the U.S.
Remedy – CVD (tariff surcharge)
equal to amount of subsidy.
Dr. Malawer, J.D. Ph.D. (2016)
The remedy for
Dumping and
Subsidies are tariff
surcharges – ADD
or CVD. To be equal
to the margin of
dumping or amount
of subsidy.
25
Escape Clause (Safeguard) (§201)
U.S.
Foreign Firm
“Fair Import” (Nothing Wrong)
Remedy – Tariff surcharge or quotas.
(Surge is a Substantial Cause of Serious Injury to
Domestic Industry caused by imports. )
General WTO Note.
WTO Litigation Note.
The WTO agreements on
Dumping, Subsidies and
Safeguards provides rules
when trade remedies
(tariff surcharges) may be
levied. National laws
mirror WTO obligations.
With the DSU a system of
multilateral review is
established of national
measures.
Two methods of
litigation over foreign
restriction – U.S. can
contest foreign act
directly in WTO or it
can apply own
measures and have
them attacked in
WTO. In either case
the WTO will then
review the contested
foreign restriction.
Dr. Malawer, J.D. Ph.D. (2016)
26
National Security (§232[b]).
U.S.
[ Impair National Security ]
EU
Imports (Fair)
Dr. Malawer, J.D. Ph.D. (2016)
27
Retaliation (§301)
[U.S. Restricts Foreign Imports in Retaliation]
Basic Issue – Is §301 contra to WTO?
[USTR required to follow DSU?]
Japan
U.S.
Imports (Fair)
U.S. Exports
Counter-Restriction
Foreign Market Access Restriction
Operation of Statute -- “Unjustifiable” (mandatory) or “Unreasonable” (discretionary)
Illegal -- Violates agreement
Dr. Malawer, J.D. Ph.D. (2016)
Discriminatory / Unfair
28
Special §301 (Intellectual Property).
China
U.S.
Imports (Fair)
U.S. Exports
USTR required to have annual reviews
– leading to PFC & possible
investigation. Same as Basic 301.
U.S. Restricts Foreign Imports in
retaliation.
Foreign Market Access Restricted (“Unfair or Illegal foreign
trade practice” as to Intellectual Property even if in compliance
with WTO / TRIPS).
Dr. Malawer, J.D. Ph.D. (2016)
29
Telecommunications (§1377).
EU
U.S.
Imports (Fair)
U.S. Exports
USTR required to have annual
reviews – leading to PFC &
possible investigation. Same as
Basic 301.
U.S. Restricts Foreign Imports in
retaliation.
Foreign Market Access Restricted (“Unfair or
Illegal foreign trade practice” as to
Telecommunications.
Dr. Malawer, J.D. Ph.D. (2016)
30
Illegal or Unfair Importation / IP (§337).
Major issue in ITC litigation today
Issue – Is this consistent with National Treatment Principle?
EU
U.S.
Remedy: Cease &
Desist Order
Imports (Unfair
Import or Method
of Competition) -Violation of Patents
or Trademarks.
Dr. Malawer, J.D. Ph.D. (2016)
31
•Section 337 of Tariff Act of 1930. Declares unlawful “unfair acts of
importation.”
–Specific language applies to class of intellectual property
rights (patent, trademark, registered mask work of
semiconductor chip product) as to imports. No injury standard
for this group (compared to non-IPR imports).
–Different (lower) standard as to violation than patent laws
generally in the U.S.
–GATT panel in 1988 found this to violate “national
treatment principle.” Art. III (4)
Dr. Malawer, J.D. Ph.D. (2016)
32
OTHER IMPORT LEGISLATION
& IMPORT SANCTIONS.
•
•
Sec. 204 of 1956 Agriculture Act.
Adjustments to textile imports under
former MultiFiber Agreement (MFA)
& now the ATC .
Various import restrictions
authorized for violation of laws via
international environmental
conventions:
– Marine Mammal Protection Act
(1972). Importation ban when
have incidental kills.
– 1973 Endangered Species Act.
Importation ban on specified
species.
•
– Sec. 8 of Fisherman’s Protective
Act (Pelly Amend.) Import
sanctions when practices
diminishes int’l programs.
– Note:
• Trade sanctions are used
as to imports for nontrade violations.
• Sanctions often used for
exports (but also imports).
Sec. 122 of ‘74 Trade Act. Import
restrictions for balance of payments.
Dr. Malawer, J.D. Ph.D. (2016)
33
Note – “Gray Market” Imports
Imports back into the U.S. after first sale abroad by either goods
shipped from the U.S. or manufactured abroad and sold first
abroad – at a lower prices than sold in the U.S.
First Sale / export abroad
Upheld by S.Ct.
Sold back to the U.S.
consumer at a lower
price than sold by
U.S. retailer.
Reexported to U.S.
Produced & sold abroad
Pending in S.Ct.
Exported to U.S.
Dr. Malawer, J.D. Ph.D. (2016)
34
4. UNILATERAL RETALIATION (Section 301).
Dr. Malawer, J.D. Ph.D. (2016)
35
Section 301 Actions
“Retaliation”
• Section 301
• Super 301
• Special 301
• Section 1337
Dr. Malawer, J.D. Ph.D. (2016)
36
“Retaliation” (con’t).
• Regular 301: USTR -- violation of trade agreements or
unreasonable or unfair practices (dual investigation).
• Super-301: USTR annually reviews to identify priority foreign
country practices (PFC) & possible action. (Not renewed)
• Special 301: Annual review of barriers in intellectual property rights
to identify priority foreign country practices (PFC) & possible
action.
• Sec. 1377: Annual review of barriers in foreign telecommunication
markets to identify priority foreign country practices (PFC) &
possible action.
Dr. Malawer, J.D. Ph.D. (2016)
37
5. U.S.TRADE SANCTIONS.
Dr. Malawer, J.D. Ph.D. (2016)
38
Trade Sanction Legislation:
General Legislation – Peace & War.
External Threat / Peace time.
International Emergency Economics Powers Act (IEEPA)
Time of war.
Trading with the Enemy Act.
Dr. Malawer, J.D. Ph.D. (2016)
39
Trade Sanctions Legislation:
Basic Characteristics.
• Trade sanctions only by delegation of authority by Congress. (Not within the
President’s inherent authority.)
•Have general sanctions legislation and country specific:
•General legislation includes IEEPA & Trading with the Enemy Act.
•Country specific legislation: Syria, Iraq, Iran, Cuba ….
•Trade sanctions take various forms:
•Restrictions on exports from the U.S. (export controls).
•Restrictions on imports into the U.S.
•Restrictions on financial transactions from the U.S. and on U.S. firms.
•Some trade restrictions enforce other statutes or treaties – environment.
Dr. Malawer, J.D. Ph.D. (2016)
40
Trade Sanctions: Policy Issues.
• Empirical issue of effectiveness.
•Assessment in terms of impact on both corporate transactions and foreign
policy objectives.
• Need to consider unilateral v. multilateral sanctions as to issue of
effectiveness.
•“Cost-Benefit analysis.” Hurting primarily ourselves because of ineffective
sanctions?
•Sanctions often impacts trade relations with our allies when U.S. tries to
enforce extraterritorially.
• Issue of using trade measures for non-trade issues (for foreign policy or national
security reasons).
• As to firms when impose sanctions they allow foreign firms to still compete – issue
of competitiveness.
• Raises issues of reliability of U.S. contractors.
Dr. Malawer, J.D. Ph.D. (2016)
41
TRADE SANCTION LEGISLATION.
•
•
•
Various forms -- often involves an embargo
(imports & exports), foreign investment
restrictions (for political or security
rationale).
Have general sanctions legislation and
country specific sanctions.
General Sanctions :
– Int’l Emergency Economic Powers Act
(IEEPA): “extraordinary external
threat.” (peace time)
– Trading with the Enemy Act (time of
war).
•
Country specific Sanctions:
– Iran & Libya Sanctions Act, 1996
(amended 2006).
– Cuba -- Helms - Burton, 1996: Sue for
confiscated property & denial of
admission. (Codifies prior sanctions.)
– “Glenn Amendment” to Nuclear
Proliferation Act, 1994. (Applied to
India, Pakistan, 1998)
– Syrian Sanctions Act. (2003).
– Magnitsky Bill (2012).
– Russian Sanctions / Crimea (2014).
Dr. Malawer, J.D. Ph.D. (2016)
42
Trade Sanction Legislation.
•
•
Country-specific sanctions:
– Cuban Trade Embargo Sec. 620a of
1961 For. Assist. Act.
– Iraq Sanctions Act (1990). Trade
embargo. Prohibition of almost all
U.S. transactions.
Note -- Various trade restrictions for nontrade reasons:
– Exon-Florio (CFIUS).
Pres. prohibit U.S. merger by foreign
firm for national security.
• DP World (2006).
• CNOOC – UNOCAL (2005).
• Huawei (2012).
– Merchant Marine Act (Jones
Act)(1920). Restrictions on foreign
ships.
– Int’l Religious Freedom Act (1998).
Discretionary authority in the
President.
Dr. Malawer, J.D. Ph.D. (2016)
43
Seven Lessons from Economic Sanctions, Reconsidered (2007).
•
•
•
•
•
•
•
•
Don’t bite off more than you can chew.
– Careful of inflated expectations.
Friends are more likely to comply than adversaries.
– Closer trading partners comply. {What about greater integration into global
economy and institutions?}
Beware autocratic regimes.
– Hard to bully a bully.
Slam the hammer, don’t turn the screw.
– Don’t do incremental.
More is not necessary merrier.
– Large coalitions not necessary.
Choose the right tool.
– Use companion measures (non-economic).
Don’t be a cheapskate or a spendthrift.
– Careful of self-inflicted costs.
Generally – Look before you leap!
Dr. Malawer, J.D. Ph.D. (2016)
44
D’Amato Sanctions (Iranian Sanctions):
Foreign Joint Venture in Iranian Oil.
Total, SA
French
Gazprom
Petronas
Russian
Malaysia
IRAN
[Sanctions waived
Summer 1998]
Oil field development agreement
Dr. Malawer, J.D. Ph.D. (2016)
45
Note: Export Promotion Legislation.
•
•
•
Export Enhancement Act (1988).
Agricultural Export Sales (PL 480).
President Obama’s proposals (2010).
Dr. Malawer, J.D. Ph.D. (2016)
46
6. CONSTITUTION & TRADE.
Dr. Malawer, J.D. Ph.D. (2016)
47
CONSTITUTIONAL ASPECTS
OF TRADE AGREEMENTS.
•
•
•
•
•
•
The Congress has exclusive authority to regulate foreign commerce.
The President has authority to negotiate international agreements.
President has no inherent authority to affect tariff or other domestic laws.
Since 1934 Congress has delegated authority to the President to negotiate trade
agreements.
President has authority to negotiate trade agreements without delegated authority
if doesn’t impact on tariffs and domestic law.
Newer Legal Issue – Does the inherent “Foreign Affairs” power of the President
now include “Global Trade” especially as to newer trade issues (non-tariff issues).
• National Intelligence Council – Trade & investment are the future
strategic and geopolitical issues for the U.S. (2008, 2010, 2012).
Dr. Malawer, J.D. Ph.D. (2016)
48
Three Judicial Doctrines & Foreign Affairs:
Federalism, Separation of Powers & Judicial Review.
President
FEDERAL
Courts
Delegation of Authority.
Preemption.
Congress
Judicial Review.
Delegation under 1934 RTAA. “Fast Track
"of 1970s supplements delegation.
STATES
•Political
question.
•Ripeness.
Exclusive congressional authority in foreign trade & shared
authority in foreign policy. But what happens when trade
becomes more important as a foreign policy issue?
Dr. Malawer, J.D. Ph.D. (2016)
49
International Agreements & U.S. Law:
Treaties & Executive Agreements – Process.
Both Supreme Law of the
Land [Article 6 –
Supremacy Clause &
Precedent.]
President.
Formal Treaty.
[Article 2 -- Exec. Auth.] [House not involved.]
Senate.
President.
Executive Agreement.
Statute & Agreement.
Problem of Conflict -“Last in time prevails.”
]Not in Constitution.] [Both houses involved.]
Congress
Dr. Malawer, J.D. Ph.D. (2016)
50
International Agreements & Customary International Law
as Domestic U.S. Law.
Formal Treaties
Article VI of Constit.
… Mo. v. Holland
Executive Agreements
Precedent
… Pink Case,
… Dames & Moore.
Cust. International Law
Precedent
… Paquete Habana.
Domestic Law.
Dr. Malawer, J.D. Ph.D. (2016)
51
TRADE AGREEMENTS: Delegation of Authority, Implementation,
“Fast Track” (TPA).
Congress has ‘exclusive authority’
over foreign trade
Congressional
Authority
Delegation of Authority (1979 / 1988 Trade Acts).
Sets negotiating objectives. “Fast Track / TPA.”
President Concludes
Trade Agreement
Concludes WTO & Multilateral
Agreements as international obligations
(Executive Agreements).
Legislation implements trade agreements
(URIAA) as domestic law
Creates domestic law obligations &
approves agreements
Implementing
Legislation
ABC
Corp
Domestic law
XYZ
Corp
Dr. Malawer, J.D. Ph.D. (2016)
52
Dual Nature of Trade Agreements & Federal-State Relations.
Trade Agreement (WTO)
U.S.
EU
International Obligation
Implementing
Legislation.
Federal
Note on WTO & States.
State
Domestic Law.
 WTO obligations apply to states.
Problem is that state law may violate WTO
obligations and create liability for the U.S.
Corp. X
in U.S.
Federal authority is limited to consulting – may
bring an action under implementing legislation.
Dr. Malawer, J.D. Ph.D. (2016)
53
Trade Policy, Foreign Policy and Domestic Policy -- Problem.
Trade policy today is central to foreign policy. It is also crucial to domestic policy. The U.S.
Constitution gave the job of regulating trade exclusively to Congress under Article 1, Section 8,
Clause 3. But this was late in the 18th century when trade was barely more than setting customs
duties. Not of great popular concern. The Constitution gave great powers to the President in
foreign affairs and they grew even more greatly over the next two centuries. The problem is this. In
the 21st century trade has emerged as one of the most important foreign policy and domestic policy
issues. (The trade and economic sanctions on Iran and Russia are recent examples.)Yet, the
structural context of dealing with it seems to be dated. What needs to be done? Once trade was
considered a bipartisan concern or even nonpartisan. We need to turn back to this attitude. Is this
likely?
Dr. Malawer, J.D. Ph.D. (2016)
54
7. “FAST TRACK AUTHORITY.”
Dr. Malawer, J.D. Ph.D. (2016)
55
History of “Fast Track (TPA).”
•
•
•
•
•
•
First created during Ford Administration in the Trade Act of 1974.
• To deal with a broader trade agenda (beyond tariffs) of the Tokyo Round
of negotiations.
Renewed by Congress almost continuously from 1975 - 1994.
Congress denied new fast track authority to President Clinton in Fall 1997. (First
time Congress denied such renewal.)
“Fast Track” (“Trade Promotion Authority”) was granted to President Bush in
August 2002. (Was the reason for new steel tariffs to gain domestic support?)
Expired in Spring 2007. What is the impact of this on existing U.S. trade
negotiations (TTP and TTIP)?
General Question: Does the President really need “Fast Track” ?
Dr. Malawer, J.D. Ph.D. (2016)
56
Procedural Aspects of “Fast Track.”
•
•
Expedited rules & procedures for Congressional consideration of trade
agreements.
Four essential features:
– Up or down vote, with no amendments on implementing
legislation.
– Vote within fixed period.
– Consultations with Congress during negotiating process.
– Sets negotiating objectives.
Dr. Malawer, J.D. Ph.D. (2016)
57
Juridical Aspects of Process.
•
•
•
“Fast Track” authorizes trade negotiations and delegates authority to the
President.
Resulting international agreement is an “Executive Agreement,” not a formal
treaty.
Allows for a role for the House of Representatives in an international agreement
(not provided in the formal treaty process).
Dr. Malawer, J.D. Ph.D. (2016)
58
Juridical Aspects -- Con’t.
•
•
•
“Implementing Legislation” implements the trade agreements -- creates binding
domestic law within the U.S.
Resulting international agreements are binding as international law among states.
Often will have additional provisions in a member state’s implementing legislation.
Dr. Malawer, J.D. Ph.D. (2016)
59
8. URUGUAY ROUND AGREEMENTS (WTO) &
DOHA Trade Negotiations.
Dr. Malawer, J.D. Ph.D. (2016)
60
URUGUAY AGREEMENTS as
‘Executive Agreements’
•
•
•
WTO (Constituent)
Annex 1A (Goods)
• GATT 1994
• TRIMS
• A/D
• CVD
• Safeguards
• Agriculture
• ATC
• SPS
Annex 1B (Services / GATS)
•
•
•
Annex 1C (Intellectual Property
Rights / TRIPS)
Annex 2 (Dispute Resolution / DSU)
Plurilateral -- Gov’t Procurement.
These agreements were
concluded pursuant to
“fast track” authority and
then implemented by
the URIAA.
Dr. Malawer, J.D. Ph.D. (2016)
61
Trade Issues Negotiated at Uruguay Round & Subsequently.
•
•
•
Traditional Issues (Expanded).
– Goods.
– Agriculture.
– A/D.
– CVD.
– Safeguards.
Newer Issues.
– Services.
– Intellectual Property.
– Institutional.
• WTO.
• DSU.
•
•
•
•
Singapore Agreements (1997).
– Financial Services.
– Telecom.
– Inform. Technology.
Singapore Issues (1997 Ministerial)
– Investment.
– Competition rules (cartels).
– Government procurement.
Newer Issues (post-Uruguay).
– Labor.
– Environment.
Even Newer
– Corruption
– Climate.
Post-Financial Crisis (post-2008).
– Trade & financial architecture
– Exchange rates.
– Gov’t commodity cartels.
– Food security / Safety / Land investment.
– For. gov’t investment (SWF).
– Enlarged RTA’s (TPP, TTIP)
– Cyberespionage.
Dr. Malawer, J.D. Ph.D. (2016)
62
ACCOMPLISHMENTS OF THE
URUGUAY ROUND.
•
•
•
•
•
•
•
Establishment of a permanent trade institution.
WTO to negotiate trade rules & apply them. (Global trade to be a rulebased system – not governed by power.)
Providing the WTO with a firm legal basis & detailed constituent rules.
(Cured the GATT “legal defects.”)
Integrated package of substantive rules.
Further defined traditional trade issues: dumping, export subsidies,
agriculture, procurement.
Extended general GATT principles and disciplines to newer trade areas:
investments, intellectual property, services.
– For example, list of prohibited subsidies.
Compulsory & binding dispute resolution.
Dr. Malawer, J.D. Ph.D. (2016)
63
Two Basic Principles of the WTO.
Most Favored Nation Principle.
National Treatment Principle.
Both principles based on the principle of nondiscrimination (as to different imports and
domestic products).
Dr. Malawer, J.D. Ph.D. (2016)
64
Doha Trade Rounds.
•
•
•
•
•
•
•
•
•
“Doha Ministerial Declaration.” (Nov. 14, 2001).
– List issues as to “expanded negotiating agenda” and “other activities.”
– To determine whether the Singapore issues were to be part of further negotiations.
– Separate declaration on drug patents & compulsory licensing for production in LDC’s.
“Decision on Pharmaceutical Patents.” (August 30, 2003).
– Follows the Doha declaration on “compulsory licensing” as a public health exception to
TRIPS and allows for export to other LDC’s.
“July 31, 2004 Package” (After Cancun Ministerial).
– Agriculture& cotton.
• Domestic support, export subsidies, S&D treatment, market access.
– S & D treatment principle.
– No inclusion of “Singapore Issues” – (Investment, Competition & Government Procurement).
Hong Kong Ministerial (2005) – inconclusive.
July 2006 / 2009 – Trade negotiations suspended.
Expiration of TPA / Fast Track in 2007 complicates trade negotiations.
Bali Ministerial (December 2013) reaches some minimal agreements (Three Pillars).
India rejects Bali but then agrees to it, mostly (2014).
Nairobi (2015).
Dr. Malawer, J.D. Ph.D. (2016)
65
Ministerial Meetings under WTO.
•
•
•
•
•
•
•
•
•
Singapore (1996).
Geneva (1998).
Seattle (1999).
Doha (2001).
Cancun (2003).
Hong Kong (2005).
Geneva(2009).
Bali (2012).
Nairobi (2015).
Recent Problems – Global Financial Crisis & Global Trade
National Treatment & Buy American.
-- Under the GPA the NTP proscribes it. Depends if
countries are parties. U.S. states may be bound if
accepted GPA.
“Bailouts”& Subsidies.
-- Bailouts to only U.S. firms may violate
national treatment and / or subsidies.
Dr. Malawer, J.D. Ph.D. (2016)
66
Sources for Global Trade Law.
•
•
•
•
“Overview & Compilation of U.S.
Trade Statutes” (annual, Ways &
Means).
“Summary of Statutory Provisions
Related to Import Relief” (annual,
USITC).
“Trade Policy Agenda / Annual
Report” (annual USTR).
“National Trade Estimate” (annual
USTR).
Dr. Malawer, J.D. Ph.D. (2016)
67
Web Sites: Trade Law & Policy.
•
•
•
•
Office of the United States. Trade
Representative http://www.ustr.gov
U.S. International Trade Commission
http://www.usitc.gov
World Trade Organization
http://www.wto.org
•
•
•
Inside U.S. Trade (World Trade Online)
http://insidetrade.com
International Trade & Investment (Commerce
Dept.) (http://www.ita.doc.gov/legal
U.S. & Global Law: http://www.US-GlobalLaw.net
Global Trade Relations.
http://www.GlobalTradeRelations.net
Dr. Malawer, J.D. Ph.D. (2016)
68
Web Sites -- Con’t
•
•
•
•
•
Encryption Export Controls
(Commerce Dept.)
http://www.bxa.doc.gov/ encstart.htm
International Telecommunications
Union (ITU) http://www.itu.ch
Information Technology Industry
Council (ITIC) http://www.itic.org
Information Technology Association
of America (ITAA)
http://www.itaa.org
Organization for Economic
Cooperation & Development (OECD)
http://www.oecd.org
•
•
•
•
•
•
Economic Strategy Institute
http://www.econstrat.org
Institute for International Economics
http://iie.com
Asian Pacific Economic Cooperation
(APEC) http://www.apecsec.org.sg
World Bank Group
http://www.worldbank.org
International Monetary Fund
http://www.imf.org
Berkeley Roundtable on the
International Economy
http://www.brie.berkeley.edu/ brie
Dr. Malawer, J.D. Ph.D. (2016)
69
Dr. Malawer, J.D. Ph.D. (2016)
70