Author: Simon Lester

The Economist says it's Canada:

Last July the European Parliament voted to ban the importation of seal products. …

Canada and Norway believe that the European ban breaks international trade rules, and have both lodged complaints with the World Trade Organisation.  …

The Canadian government clearly takes the issue seriously. It might even become a stumbling block in negotiations toward a free-trade agreement between Canada and the EU. The International Fund for Animal Welfare, a conservation charity, has criticised Canada’s zeal, complaining that the government it is spending more money defending the seal hunters than the industry actually earns. The Canadian government, for its part, feels duty bound to protect the interests of a number of its poorer citizens against lobbying from special interest groups a long way away.

The evidence that the EU takes the issue seriously is harder to find. The ban appears to be a cheap way to be seen to be doing something to protect animals, thus appeasing the animal welfare lobby, by attacking a group of people who cannot fight back. Anti-sealing activists view the trade ban as a monumental victory for animal rights, having had the Canadian hunters in their sights for years. Relatively few Europeans agree with animal-rights activists that any killing of animals is bad. But most people do not eat or wear seals, are squeamish about killing cuddly doe-eyed mammals, and do not worry about the inconsistency of such a ban being enforced by a group of nations which kills it own seals for the expediency of fishermen, and kills tens of millions of farmed foxes and minks for their pelts every year.

I'm not so sure about the conclusion that the Canadian government takes this more seriously than the EU government.  The way I see it, each side has a small group of enthusiastic supporters, with probably a slim majority of its citizens overall in support of the official position.  The Canadians seem more passionate about the issue, but that's because they are the ones who have to get the EU law repealed.  Those protesting the status quo always seem more emotional.  By contrast, the EU folks have the law they want on the books right now, so they are just calmly playing defense.

Anyway, I'm not sure any of that matters as much as the WTO consistency of the EU law.  In that regard, I'm curious to hear the EU response on the mink and fox point.

Following up on Meredith's post, there has been a lot of reporting in the Australia/New Zealand press about the decision.  Here is a sampling:

I thought one of the most interesting points was in this piece:

Local fruit retailers also have a problem with the imports proposal and say they will not stock the New Zealand fruit.

Benny Parsons, of The Nut House at Ulverstone, said the seven different varieties of apples he sells are grown in the Mersey Valley area and it would stay that way.

Grower Shane Weeks, of Ayer's Orchards, said the two big supermarkets would probably be the only retailers looking for the imported, and most likely cheaper, product.

He hoped NZ apples would be labelled as such if they ended up in local supermarkets.

So let's say Australia does eventually remove the restrictions.  How will Australian retailers and consumers react?

Continuing with my occasional (although becoming somewhat frequent) posts on NAFTA Chapter 11 non-discrimination standards, there is a new decision to talk about: Merrill & Ring v. Canada.  The basic facts, from the Tribunal:

26. This case concerns a claim by the Investor in respect of the implementation of Canada‘s Log Export Regime to the Investor‘s timber operations in British Columbia and the requirement that any of its exports be subject to a log surplus testing procedure, among other regulatory measures.

Luke Peterson of the Investment Arbitration Reporter (subscribers only) describes the case as follows:

The U.S. firm had contended that Canada imposed restrictions on the export of logs from Canada to the United States, and that these restrictions obliged the company to sell its products in Canada for less than they could fetch if exported to the United States. The claimant also objected to the administration of the log export regime which was viewed as exerting unfair, un-transparent and discriminatory effects.

With regard to the national treatment claims, the investor's arguments are at paras. 60-68 and Canada's arguments are at 69-78.  Here are some key extracts the Tribunal's summary of the investor's arguments (much of the focus was on "in like circumstances"):

61. It is argued in this connection that the Investor is in "like circumstances" with log producers that export logs from other parts of Canada and from other parts of British Columbia, as is also in "like circumstances" with other log exporters in that province, including those located in coastal areas. All these other log exporters are either not subject to the Log Export Control regime as practiced by Canada in British Columbia or subject to less restrictive regulatory measures.

62. This different treatment is, in the Investor‘s argument, particularly evident with respect to the unavailability of standing exemptions for its operations. Those benefiting from such exemptions have a significant advantage in treatment as opposed to those that have been excluded, such as the Investor. These advantages result from the fact that the producer knows in advance that it will be able to export its logs and can thus enter into supply contracts with its customers, for which it will be able to obtain the best market price, it is not subject to the surplus test and thus free from "blockmailing", and its products will not be subject to the exposure to the natural elements resulting in deterioration and infestation.

…

64. … the Investor asserts that treatment ought to be compared with that accorded to domestic investments in the same economic or business sector, which is to be broadly understood, including in particular the requirement to provide for competitive opportunities. It is argued in this respect that in view of NAFTA‘s objective of promoting conditions of fair competition in a free trade area, the equality of competitive opportunities is an essential element of the national treatment standard. …

65. In the Investor‘s submission, the concept of "like circumstances" does not mean that circumstances need to be identical and that even if the standard laid down in the Methanex decision is followed, so as to compare an investor with a domestic investor in an identical product market, in the instant case the test is satisfied because the product market for all comparisons is that of log producers.

…

67. The fact that the Investor is in "like circumstances" with log producers in Alberta, but subject to a restrictive regulatory export regime which does not apply to the latter, should be enough to establish that national treatment has not been observed. In addition, the Investor, as a producer in the British Columbia coast, is subject to stricter harvesting and sorting requirements than those that apply in the British Columbia interior. The Investor also asserts to be in "like circumstances" with producers in the British Columbia coast, many of which are subject to the more lenient conditions of provincial regulations. …

The Tribunal's reasoning is at paras. 79-94.  I'm not going to go through all of the reasoning; rather I'll just quote some parts I found interesting and talk a bit about them.

First up, the role of intent:

80.  The Tribunal in S.D. Myers related "treatment" to a requirement of a practical impact on the investment and not merely a motive or intent so as to produce a breach of Article 1102. While motive or intent cannot be excluded from the scope of Article 1102 beforehand, it is not an issue that arises in the instant case.

I always like talking about intent in the context of non-discrimination, and I was glad to see that this Tribunal would not exclude intent entirely.  But nothing going on with the issue in this case, unfortunately.

Next, an important issue related to the relevance of different levels of government in the context of "in like circumstances":

81. An additional issue concerning treatment that the Tribunal also needs to consider is whether the treatment accorded to the Investor by the national government can be compared to that accorded under British Columbia jurisdiction. Canada argues in this respect that Article 1102(3) specifically distinguishes the treatment accorded by a state or province from that of the national government and, thus, the two cannot be compared.

82. Despite the fact that, on occasion, concurrent jurisdictions relating to the same activity might make that distinction difficult, as in some respects the instant case appears to reflect, the Tribunal considers the argument made by Canada correct.  Treatment accorded to foreign investors by the national government needs to be compared to that accorded by the same government to domestic investors, subject to meeting the requirement to be in "like circumstances", just as the treatment accorded by a province ought to be compared to the treatment of that province in respect of like investments.

I'm not sure yet what I think about this aspect of the reasoning.  I suppose it depends in part on what exactly the claim is.  If the claim relates entirely to the actions of the national government, then I think I agree that sub-national government actions would not be relevant.  But if it is the overall treatment resulting from the actions of various levels of government, it might not be so easy to separate out the different actions.  The issue came up again later in the reasoning:

89. Having decided that the proper comparison is between investors which are subject to the same regulatory measures under the same jurisdictional authority, which in the instant case is the comparison between foreign and domestic investors subject to Notice 102 and the national jurisdiction of the Canadian government, the Tribunal must now determine which is the appropriate comparator for the purposes of the treatment accorded to investors "in like circumstances" under Article 1102.

90. To the extent there are investors in identical circumstances to be compared, this makes it unnecessary to resort to the Methanex alternative choice noted above of finding investors in the most like circumstances. Such identically situated investors are those log producers operating on lands under federal jurisdiction in British Columbia and subject of course to the same requirements under Notice 102. …

91. Canada has persuasively argued that the Investor must be compared to other log producers subject to Notice 102 and not to producers in other provinces, notably Alberta, or to producers that are operating under the provincial regulations. As some of the Investor‘s operations are located in provincially regulated lands, these ought to be compared with those operations of similarly located log producers, whether in respect of the surplus test or of harvesting and sorting requirements. Some sub-categories of provincially regulated operations, such as producers in remote areas of British Columbia, which is also the case of some of the Investor‘s operations, ought to be compared within that sub-category.

…

93. … In all the comparisons that are made within the appropriate category, the treatment the Investor is accorded is identical to that accorded to domestic investors in the same category. …

The basic idea, if I follow this correctly, is that the companies subject to particular regulations (e.g., federal or provincial) should be grouped together, and compared within the category (federal to federal, provincial to provincial).  I see the argument, but I'm not sure I'm convinced that companies that fall into different regulatory categories are never in "like circumstances."  However, I have a hard time reaching a firm conclusion on the point in the context of this case, mainly because this is in part a factual question and I'm not all that clear on the facts here.  I can imagine a situation where it is the overall regulatory regime, including both national and sub-national laws, that is at issue, and thus the categories might not be relevant for the comparison.  But I'm not sure this case matches that situation.

Now a bit of talk about whether to look at the "best treatment" available:

93. … In all the comparisons that are made within the appropriate category, the treatment the Investor is accorded is identical to that accorded to domestic investors in the same category. Here, there is no issue as to which is the best treatment available to an investor, such as was discussed in Pope & Talbot, since the treatment here is the same in each category of comparison.

This "best treatment" point is another issue I would have liked to have seen discussed, as it is important for the scope of the national treatment standard.  Nothing got resolved here — it will have to wait for another case.

Finally, the last paragraph, which for me was the most interesting part:

94. The Tribunal turns lastly to the issue of whether the purpose of Article 1102 is to prevent nationality-based discrimination as discussed in Feldman. In that case, the Tribunal concluded that the concept of national treatment in Article 1102 "is designed to prevent discrimination on the basis of nationality, or by 'reasons of nationality‘". While nationality-based discrimination would make a finding of breach of national treatment unavoidable, some argue that this is not the only aim of the concept of national treatment under Article 1102. They would say that, even in the absence of discrimination, a differentiated treatment which is arbitrary and unjustified might qualify as a breach of national treatment. Thus discrimination might entail considerations other than nationality. However, in the instant case there is not the slightest evidence that any of the measures discussed might be based on considerations of the nationality of the Investor. As concluded above, nor is there any differentiated treatment on other grounds among the appropriate categories of comparison. Accordingly the Investor‘s Article 1102 case must fail.

Parsing the things people say about non-discrimination can be extremely difficult.  I've been reading some old GATT cases recently, and I often find myself thinking, "What did they mean by that?"  Sometimes the same phrase can be used by different people to refer to different conceptions of national treatment.  Also, the different conceptions can be hard to define.  As a result, it's not always clear what a panel/tribunal has in mind.

Here, the Tribunal was somewhat clear in distinguishing between two approaches to national treatment, but I do have some questions nonetheless.

First, the Tribunal refers to "nationality-based discrimination."  I'm not sure everyone uses this term in the same way.  It could mean: (1) de jure discrimination based on nationality, or (2) de facto discrimination where there is evidence of intent and effect, or even (3) de facto discrimination where there is a clear disparate impact, or possibly even (4) something else entirely.  It's not clear to me what exactly the Tribunal had in mind here.

Second, the Tribunal also mentions "differentiated treatment which is arbitrary and unjustified."  It notes that some people would find a national treatment violation in this situation.   I think what is meant here is that an individual investor gets really bad treatment in comparison to the treatment received by some other investor (domestic or foreign).  This constitutes a violation even though none of the standards for "nationality-based discrimination" are met.  Here, my question is, is this basically the same standard as an "individual product" approach in GATT/WTO jurisprudence, where any less favorable treatment for a particular foreign product, as compared to an individual domestic product, leads to a finding of violation?  Or is it something different?

Moving to the conclusion, the Tribunal rejected the claims under either standard.  With the nationality-based argument, it said there was no evidence; on the "differentiated treatment" point, it went back to its "categories" reasoning.  As a result, it didn't have anything more to say about all this.

Summing up, it seemed to me that this Tribunal went with a narrow legal standard for national treatment, under which it is difficult to prove a claim of violation.  The key was its reliance on the different categories as part of the "in like circumstances" analysis.  This provided a good route for the panel to reject the claim, without having to get into some of the other national treatment issues noted above.

Assuming we are on our way to a resolution of the China currency dispute, what caused the situation to improve so rapidly, when not long ago the rhetoric was getting quite heated?  Dan Drezner sets out some possibilities, along with his view:

If China's shift is a real one, there appear to be three possible sources of change:

1)  Domestic factors and actors convinced China's leadership that diminishing marginal returns for keeping the yuan fixed and masively undervalued had kicked in;

2)  China responded to mounting multilateral pressure and feared being isolated at the upcoming G-20 meetings. 

3)  China responded to threats of unilateral U.S. action, such as being named as a currency manipulator, and/or calls for a trade war;

These are not mutually exclusive arguments, and we might never know exactly what caused China's [change].  But for the record, I think (1) and (2) mattered a hell of a lot more than (3).  That said, I can't rule out the possiblity that their antics helped scare China into action. 

Thus, Drezner's view seems to be that the more strident unilateral approach of people such as Chuck Schumer and Paul Krugman was probably not the main reason for the recent positive developments.  That sounds reasonable and may be right.  Nevertheless, I wonder if this piece from the Economist offers some insights:

Mr Geithner also tried to shift the terms of the debate away from bilateral threats, by making clear that forthcoming multilateral meetings, especially those of the G20, are the right places to discuss China’s currency. And his willingness to stand up to domestic political pressure (130 congressmen had sent him a letter demanding immediate action), set a good example to policymakers in Beijing.

Note the part about Geithner's "willingness to stand up to domestic political pressure (130 congressmen had sent him a letter demanding immediate action)".  I wonder if this was a kind of "good cop, bad cop" exercise, in which the Krugmans and Schumers (the bad cops) of the world argue strenuously for strong unilateral action; then, the good cop (Geithner) can step in and reassure everyone that 25% tariffs, etc., will never happen, and that cooler heads will prevail as long as China shows some progress.  All along, Schumer and Krugman knew they were playing this role; that their proposals would not be followed; and that by making these demands they were setting the stage for a more moderate solution.  Somebody had to play that role, and they were happy to be the ones to do it.

On the other hand, maybe I'm reading way too much into all of this.  Perhaps they were simply arguing for what they thought was needed, and it was just that the moderate view won out.

There has been some talk of settling two big disputes, the U.S. – Cotton WTO dispute and the Chinese currency dispute.  Cotton has progressed a bit further.  USTR provides the following details:

… the United States agreed to work with Brazil to establish a fund of approximately $147.3 million per year on a pro rata basis to provide technical assistance and capacity building. Under terms to be agreed by the United States and Brazil in the Memorandum of Understanding, the fund would continue until passage of the next Farm Bill or a mutually agreed solution to the Cotton dispute is reached, whichever is sooner. The fund would be subject to transparency and auditing requirements.

The United States also agreed to make some near term modifications to the operation of the GSM-102 Export Credit Guarantee Program, and to engage with the Government of Brazil in technical discussions regarding further operation of the program. The United States also agreed to publish a proposed rule by April 16, 2010, to recognize the State of Santa Catarina as free of foot-and-mouth disease, rinderpest, classical swine fever, African swine fever, and swine vesicular disease, based on World Organization for Animal Health Guidelines and to complete a risk evaluation that is currently underway and identify appropriate risk mitigation measures to determine whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease in the United States.

Following implementation of these initial steps, the United States and the Government of Brazil agreed to continue engagement on these issues, with a view to agreeing on a process by June that will allow us to reach a mutually agreed solution to the Cotton dispute.

And in the currency dispute:

U.S. Treasury Secretary Timothy Geithner will visit Beijing for talks with a Chinese vice premier for economic affairs on Thursday, Geithner's spokesman said, in a sign the two sides are moving toward settling a dispute over China's currency controls.

From the FT on the same issue:

China has begun to prepare the ground publicly for a shift in exchange rate policy, days after the US Treasury said it would postpone a decision on whether to name China a “currency manipulator”.

A senior government economist told reporters in Beijing on Tuesday China could widen the daily trading band for the renminbi and allow it to resume the gradual appreciation it halted in July 2008 in response to the global credit crisis.

I'm a little skeptical sometimes when settlements are announced, but perhaps progress is being made.  One thing I wonder about in Cotton is, what do other U.S. trading partners think of all this?  For example, how will the African cotton producers who were third parties in the dispute react to whatever "mutually agreed solution" is reached between the United States and Brazil?  Will they be satisfied with what the U.S. eventually offers?

And in the currency dispute, I guess the big question is, assuming a "gradual appreciation" occurs, will it be enough to satisfy those pushing hardest for revaluation?

I had seen brief references to a WTO complaint against China related to the credit card industry, but didn't know the details.  Here's the argument, as set out by Eric Grover in the Washington Times:

Chinese banks have 1.88 billion debit cards and 190 million credit cards outstanding, on which cardholders made 19.7 billion purchases last year. But they can't buy domestic card payment network services from American Express, Discover, JCB, MasterCard or Visa. China UnionPay (CUP) enjoys a protected card-payment-network monopoly. And merchant processors such as First Data and Global Payments, which have joint ventures in China with British banks Standard Chartered and HSBC respectively, can't compete with CUP and Chinese banks providing domestic card acceptance to merchants.

…

By Dec. 11, 2006, China's entire domestic credit and debit card market should have been open to foreign payment networks and processors. But there has not yet been a single domestic MasterCard or Visa payment transaction in China, almost nine years after it joined the WTO and three years after it pledged to have completely opened its domestic retail cards market.

While Chinese banks co-brand payment cards with MasterCard and Visa, it's only for use overseas where CUP's acceptance network is weak. Similarly, foreign merchant processors only provide card acceptance for MasterCard and Visa payments by tourists and business travelers visiting China.

…

China's ban on American, European and Japanese firms from its domestic credit and debit card market violates the letter and spirit of its WTO commitments, harms Chinese consumers and merchants, and hurts businesses such as Amex, Discover, First Data, Global Payments, JCB, MasterCard and Visa. Dialogue with no credible possibility of punitive consequences won't change China's conduct. Successful WTO complaints have borne fruit in other sectors. The United States should bring a card-payments WTO action against China unilaterally, or, possibly, with Japan and the EU.

In the comments, Jim Mathis points me to this paper by Terence Stewart and Elizabeth Drake, entitled "Addressing Balance-of-Payments Difficulties under World Trade Organization Rules".  The background they provide on GATT Article XII and balance of payments issues is excellent.  They pack a lot of information into a fairly short (13 pages) paper.  It's well worth a read.

In addition to this background, they make a brief case for the Warren Buffett "trade balancing" proposal as a measure justified under GATT Article XII.  They describe the proposal as follows:

Warren Buffett’s trade balancing proposal would bring the chronic U.S. trade deficit into balance by creating import certificates equal to the value of U.S. exports. These certificates could be granted to exporters and sold by them on the open market, or they could be auctioned by the government through a certificate market. While the first method would provide benefits to exporters, the second method would help reduce or eliminate potential inconsistencies with WTO prohibitions on export subsidies. In addition, the second method could generate a stream of revenue for the government. Importers would be required to redeem a certificate equal to the value of the merchandise being imported for each entry.

With regard to GATT Article XII, the key bit is para. 2(a), which states in part:

Import restrictions instituted, maintained or intensified by a contracting party under [Article XII] shall not exceed those necessary:

(i) to forestall the imminent threat of, or to stop, a serious decline in its monetary reserves,

or

(ii) in the case of a contracting party with very low monetary reserves, to achieve a reasonable rate of increase in its reserves.

So can the U.S. argue that it is experiencing a "serious decline in its monetary reserves" (or threat thereof), or "very low monetary reserves," and thus can invoke Article XII to use this kind of trade balancing measure?  Stewart and Drake address the point as follows:

… the fact that Article XII focuses on the decline in a country’s monetary reserves should not prevent the United States from invoking Article XII merely because the dollar is now the international reserve currency. As Table 1 demonstrates, in 2007 the amount of international reserves held by the United States was small in absolute terms compared to other countries and extremely low relative to the value of U.S. imports. In fact, U.S. reserves were not sufficient to cover even eleven days worth of imports. When the U.S. invoked Article XII in 1971, and the IMF and GATT parties agreed the country was facing a balance-of-payments crisis, U.S. reserves equaled the value of about three months worth of imports.

While other countries may argue that the United States does not need large reserves due to the status of the dollar as the dominant global reserve currency, the IMF has repeatedly stated its concerns regarding the unsustainability of the U.S. trade deficit.

I'm in a little over my head talking about monetary reserves, but if I understand this all correctly, Stewart and Drake are making the point that "international reserves" held by the U.S. (that is, reserves of currencies other than the U.S. dollar) are very low right now.  As a result, the terms of Article XII:2(a) are met.  And while other countries might argue that the U.S. reserves being examined should include U.S. dollars, as that is the main global reserve currency, Stewart and Drake argue that, even if true, this is not sufficient to preclude the use of Article XII in this situation, as the IMF has expressed concerns about the U.S. trade deficit.

I had always assumed that the U.S. would not be able to satisfy the low monetary reserves standard, because the dollar is the main reserve currency and we have lots of those (and can print more if we need them).  But I'd be interested in hearing other views on this.  Is there something to the idea that U.S. "international reserves" could be low enough to justify recourse to Article XII?

In looking at some of the sources cited in the Stewart/Drake paper, I came across this statement from the GATT negotiations:  "The underlying principle of Article 26 is the protection of the balance of payments and monetary reserves. It is being generally understood that the term 'monetary reserves' includes gold and convertible currencies."  (p. 12 of this document)  Not a definitive interpretation, but interesting nonetheless.  No doubt there is more out there, and some of it may contradict this.

As everyone has probably heard by now, Treasury Secretary Geithner announced over the week-end that he would delay the decision on whether to label China a currency manipulator.  From the press release:

I have decided to delay publication of the report to Congress on the international economic and exchange rate policies of our major trading partners due on April 15.  There are a series of very important high-level meetings over the next three months that will be critical to bringing about policies that will help create a stronger, more sustainable, and more balanced global economy.  Those meetings include a G-20 Finance Ministers and Central Bank Governors meeting in Washington later this month, the Strategic and Economic Dialogue (S&ED) with China in May, and the G-20 Finance Ministers and Leaders meetings in June. I believe these meetings are the best avenue for advancing U.S. interests at this time.

As part of the overall effort to rebalance global demand and sustain growth at a high level, policy adjustments are needed that measurably strengthen domestic demand in some countries and boost saving in others. These are also important to ensure robust job growth.  In the United States, private savings has increased, the current account deficit has fallen, and the President has outlined a series of measures to reduce our fiscal deficit. 

Countries with large external surpluses and floating exchange rates, such as Germany and Japan, face the challenge of encouraging more robust growth of domestic demand. Surplus economies with inflexible exchange rates should contribute to high and sustained global growth and rebalancing by combining policy efforts to strengthen domestic demand with greater exchange rate flexibility. 

This is especially true in China. China's strong fiscal and monetary response to the crisis enabled it to achieve economic growth of nearly 9 percent in 2009, contributing to global recovery. Now, however, China's continued maintenance of a currency peg has required increasingly large volumes of currency intervention.  Additionally, China's inflexible exchange rate has made it difficult for other emerging market economies to let their currencies appreciate.  A move by China to a more market-oriented exchange rate will make an essential contribution to global rebalancing. 

Our objective is to use the opportunity presented by the G-20 and S&ED meetings with China to make material progress in the coming months.

NEC Director Larry Summers says the decision was not about non-trade issues, such as Iran sanctions:

 TAPPER:  There are a lot of members of Congress who are concerned about jobs because of China, because of what they see — the manipulation of currency by China.  The Obama administration had scheduled a semi-annual report to Congress on currency, in which it was going to state whether or not the Obama administration believes the currency is being manipulated.  That report, we learned this weekend, is going to be delayed.

    Is it going to be delayed because the Obama administration needs China's cooperation on other things, such as sanctions against Iran?

    SUMMERS:  No.

    TAPPER:  That's not the reason?

    SUMMERS:  No, it's being delayed because that's part of our international economic dialogue, which is directed at supporting a crucial issue for jobs creation, doubling our level of exports, and that depends on what other countries do.

    We've got three major meetings, a meeting of the G-20 finance ministers, our strategic dialogue that takes place every year with China, and then the president's meeting, building on the forum he created in London and Pittsburgh last year of the G-20 countries.

    Those are opportunities to engage with China, to engage with other countries that have large trade surpluses, other countries who think they can continue to rely on the United States as an importer of last resort.  And Secretary Geithner's judgment — and I think it was the right one — was that we could report and recommend to Congress, you know, a much more effective way after we had had those meetings and taken stock of what kind of measurable progress we were able to generate out of those dialogues.

The reaction so far:

Clive Crook:

The delay is wise. Long may it continue. Hu Jintao, China’s president, has just announced he will attend a summit on nuclear security in Washington this month. The US continues to hope that Beijing will sign up to sanctions against Iran. Sacrificing agreements in these and other areas to make an empty gesture on the renminbi or, worse, to launch a series of escalating trade disputes, would be mad.

IPE Zone

Obviously, the US move allows a few months' worth of breathing space after Hu Jintao comes along for Obama's nuclear shindig, so don't take it for granted just yet that Geithner will wimp out for a third consecutive time on labelling China a manipulator. More so now, it may depend on what Beijing indicates in the upcoming economic meetings. Nevertheless, it's notable how even this usually token report is delayed in the interest of handling a particularly recalcitrant country from Washington's POV.

Senator Chuck Grassley:

“I’m disappointed that Secretary Geithner is delaying publication of the Department’s exchange rate report.  Everyone knows China is manipulating the value of its currency to gain an unfair advantage in international trade.  If we want the Chinese to take us seriously, we need to be willing to say so in public.  The past few years have proven that denying the problem doesn’t solve anything.  The Treasury Department should cite China as a currency manipulator.  I renew my call for the Administration to prepare a WTO case against China under Article XV of the General Agreement on Tariffs and Trade.”

Scott Lincicome:

… I must admit that I'm torn about this decision.  On the one hand, it's a good sign that the Obama administration is trying to use quiet diplomacy, as opposed to direct confrontation, to deal with the currency issue.  That's certainly a positive thing, as any aggressive unilateral response would probably (a) cause China to stubbornly delay RMB appreciation due to the government's paramount need to appear "strong" on the global stage; and/or (b) end up hurting American consumers and exporters.

On the other hand, I'm concerned that Geithner's move might be too clever by half.  By delaying the Treasury report, the US government still appears to be using it as a Damoclean sword to push China to appreciate its currency.  This move clearly turns the report into a US ultimatum tied directly to Yuan movement (i.e., "appreciate or else!"), rather than a regularly scheduled, legally-mandated bureaucratic event. …

Dan Drezner:

Making this shift via G-20 and bilateral channels — rather than in response to a Treasury finding of currency manipulation or Congressional threats of protectionism — gives China a more politically palatable justification for policy change.  Beijing will likely move in the right direction, albeit more slowly than anyone else would like. 

And, if nothing happens from these meetings, China can be named in the fall.  Indeed, the paradox of two-level games is that there needs to a rising but manageable possibility of protectionist action by the United States to give China an incentive to alter their policy. 

What does the future hold?  A NY Times piece suggests that revaluation of the Yuan may be coming soon:

… the announcement by Chinese authorities on Thursday that President Hu Jintao will be visiting Washington in two weeks is being seen as the beginning of a possible easing of the friction over the renminbi.

China experts said it was unlikely that China would have agreed to the visit unless there was at least an informal assurance by the Treasury Department that it would not be named a currency manipulator either on or around April 15 — the deadline for the Obama administration to submit one of its twice-a-year reports on foreign exchange to Congress.

At the same time, economists say the visit, and other Chinese moves, suggest China is finally willing to let the renminbi increase in value. Analysts at HSBC, the Hong Kong-based global bank, declared that “the latest development should make it more likely for Beijing to start moving away from the renminbi’s current de facto peg within the next few months, if not weeks.”

Before the disclosure of Mr. Hu’s trip, Goldman Sachs said that China seemed increasingly likely to allow the renminbi to begin a modest appreciation in the next three months. Helen Qiao, the China economist for Goldman Sachs, and others who have spoken with officials in Beijing said that the currency issue appeared to be under active discussion there.

In the comments, Peter Gallagher refers me to an op-ed by Greg Mankiw on Chinese currency excange rate issue.  To me, the key point in the Mankiw piece is this one:

Critics of China say it is keeping the yuan undervalued to gain an advantage in the international marketplace. A cheaper yuan makes Chinese goods less expensive in the United States and American goods more expensive in China. As a result, American producers find it harder to compete with Chinese imports in the United States and to sell their own exports in China.

There is, however, another side to the story. The loss to American producers comes with a gain to the many millions of American consumers who prefer to pay less for the goods they buy.

I hear this argument from various free market folks (both in the currency context and the foreign government subsidy context more generally), and many readers might think I'd support this view.  Here's why I'm skeptical.  It may be true that U.S. consumers benefit more than U.S. producers are hurt by these actions, and thus when balancing out those two considerations the U.S. (or any other importing country) is better off if it just accepts the subsidies/currency practices.  However, in addition to those considerations, I think we need to look at the distortions that such actions can have on production patterns.  When subsidies (or currency policy equivalents) provide an advantage for domestic producers over their foreign competitors, it is likely that we will have a situation where products are made by companies that are not the most efficient producers.  Not being an economist, I'm not sure how to calculate the welfare loss here, but my sense is that it could be significant.  As a result, I would prefer to have a situation where the most efficient producer makes the product, with no government interference distorting the situation.

For that reason, I'm not convinced that importing countries are better off when foreign governments use subsidies or currency manipulation.  I can't quantify this, of course, and I'd be curious to see if any economist has tried to do so.  But my gut feeling is that overall economic welfare would be higher without these distortions.

From a DOC federal register notice:

In the conference report accompanying the 2010 Consolidated Appropriations Act, Public Law: 111-117, the conferees directed the Secretary of Commerce to work with the Secretaries of the Departments of Homeland Security and the Treasury to conduct an analysis of the relative advantages and disadvantages of prospective and retrospective antidumping and countervailing duty systems. The report is currently scheduled to be transmitted to Congress on June 14, 2010. As part of its analysis, the conferees requested that the Department of Commerce (the Department) address the extent to which each type of system would likely achieve the goals of: (1) Remedying injurious dumping or subsidized exports to the United States; (2) minimizing uncollected duties; (3) reducing incentives and opportunities for importers to evade antidumping and countervailing duties; (4) effectively targeting high-risk importers; (5) addressing the impact of retrospective rate increases on U.S. importers and their employees; and (6) creating minimal administrative burden.

To help in its analysis, the Department is inviting the public to comment on the issue and the specific points raised by the conferees as well as identify additional issues or considerations that it believes are deserving of the Department's attention as it prepares its report. The Department is also notifying the public that it will hold a public hearing on April 27, 2010.

I'm curious as to what this is all about:  Is there a real chance that the U.S. would change to a prospective system?  And does this have anything to do with the "zeroing" issue?  It will be interesting to see the public comments.

Over at Eyes on Trade, Travis McArthur links to an article about Bill Clinton's views on free trade, which states:

Former U.S. President Bill Clinton says the free-trade agriculture policies he supported as president were a mistake. Many critics blame these policies for contributing to Haiti's hunger problems.  As president, Clinton backed trade policies that opened developing world countries to farm products from the United States. 

Critics say the subsidies industrialized countries pay to their farmers create unfair competition for developing-world farmers, driving many out of business and leaving those countries at risk of hunger. 

At a news conference in Port-au-Prince Monday, Clinton said when he helped Haitian President Jean Bertrand Aristide return to power in 1994, Clinton also signed legislation that increased the flow of cheap American rice into Haiti. 

But now, he says, "I think it was a mistake. I think it was part of a global trend that was wrong-headed." 

Clinton says the theory behind that global trend was that wealthy countries could provide poorer countries with cheaper food than their farmers could grow.  That would lead poor countries to skip directly to industrialization. But Clinton says, once he left office and saw the effects of that policy on farmers in developing countries, he changed his mind. 

"It is unrealistic to expect that a country can totally obliterate its capacity to feed itself and just skip a stage of development," he says. "It seems almost laughable now that we ever thought it." 

McArthur then says:

It’s heartening to see one of the strongest proponents of the neoliberal economic model come to realize just how damaging that model has been. For Mexico, though, this realization has come about 16 years too late.

When NAFTA entered into force in 1994, cheap subsidized American corn from corporate farms flooded the Mexican economy, forcing hundreds of thousands of small corn farmers to leave their farms.  Many of these farmers, faced with corn prices below their cost of production, often had no choice but to emigrate to the U.S. to escape economic disaster.  During the 2007-2008 global food price crisis, poor Mexicans found out exactly how costly the destruction of the Mexican corn industry could be when tortilla prices, propelled by U.S. corn prices, skyrocketed by 60 percent within a few months.  

Now that Clinton has seen the flaws of the unfair trade model epitomized by NAFTA, could he press Obama to renegotiate NAFTA to make it fair for consumers, workers, and farmers in all three NAFTA countries?

This is probably obvious to most readers of this blog, but just for the record, let me note that exports of subsidized U.S. rice (and corn) are neither "free trade" nor the "neoliberal economic model."  What Clinton and McArthur should be arguing, in my view, is that by subsidizing rice, the U.S. failed to practice free trade/neoliberal economic policies, and this failure was very harmful to Haitian rice producers.  While regional agreements like NAFTA can't do much about agriculture subsidies, the WTO tries to rein them in.

As to how non-subsidized U.S. rice would compare to Haitian rice in terms of price, I would guess that the price of the U.S. rice would be higher, but I'm not really sure.  If it were the case that even non-subsidized U.S. rice was hurting Haitian rice producers, I'll just mention that WTO rules allow developing countries to maintain a good deal of protection (and for that matter, they provide developed countries plenty of flexibility for protection, too).

Oh, and one more thing.  The article describes Clinton as saying the following:  "the theory behind that global trend was that wealthy countries could provide poorer countries with cheaper food than their farmers could grow.  That would lead poor countries to skip directly to industrialization."  I've read a decent amount on development over the years (though certainly not everything, of course), and I've never heard that theory.  To me, that seems like a horrible mangling of something that an economist might have actually said.

From the AP:

Nissan Motor Co. said Tuesday its new electric car will cost just over US$25,000 in the U.S., a move that could force rivals to lower prices on similar vehicles.

The Leaf, a four-door hatchback due in showrooms late this year, will have a base price of $32,780, but buyers can get a $7,500 electric vehicle tax credit, Nissan said.

…

Nissan says the Leaf will cost 3.76 million yen (US$40,000) in Japan. It will price the car lower in the U.S. because it wants to sell more of them in that market. The automaker says it is confident it can still make money at that price.

So that's $40,000 in Japan (the home market) and $32,780 in the U.S. (the export market).  Hmm, I hope they've talked to some anti-dumping specialists about all this!

From a recent article in The Australian:

China yesterday raised the prospect of tariffs and new policies to stem growing uncertainty in its steel industry, which faces iron ore price hikes of up to 90 per cent this year.

China's Commerce Ministry said yesterday it was preparing a "new policy" to deal with the issues and would support its world-leading steel sector in its bid to keep the iron ore price — which has recently hit record spot levels — lower and less volatile.

Ministry of Commerce spokesman Yao Jian told media in Beijing that commerce and industry ministries would provide necessary support to steelmakers, which could include trade measures and policies.

He repeated China's mantra that its position as the world's largest buyer of iron ore meant it should get lower prices.

China wants to stick with annual price contracts, but the world's main iron ore producers want to move to a quarterly system more closely aligned with market spot prices.

Analysts predicted the government would introduce preferential tariffs for long-term contracts.

…

"There are not many or radical measures the Commerce Ministry can take, without possibly violating WTO regulations," one analyst close to the China Iron and Steel Association, who asked not to be named, told The Australian .

"My personal guess is that since the ministry stressed that it strongly supports long-term prices, it may issue preferential tariffs for long-term contracts," the analyst said.

So if I understand this correctly, China might grant lower tariffs on iron ore imports where long-term contracts with suppliers have been signed.

This proposal has me thinking about the scope of GATT Article I:1, which I just recently taught a class about.  Article I:1 states:

With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any WTO Member to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other WTO Members.

One of the issues we discussed was the meaning of "unconditionally" towards the end of the provision.  We talked about cases such as Indonesia – Autos, Canada – Autos, EC – Tariff Preferences and Belgium – Family Allowances.  In all of those cases, there were circumstances under which some entities paid a lower duty than others.  These different circumstances could be thought of as "conditions" — if certain conditions are fulfilled, a lower tariff rate applies.  Without going into too much detail, there seems to be a split among the various panels as to how the differential application of tariffs should be considered in this context.  In Canada – Autos, the panel seemed to think the issue was purely whether discrimination exists, and rejected an argument relating to "conditions."  (See paras. 10.18-50)  (The recent Colombia – Ports of Entry panel cited to Canada – Autos and took the same approach.  See paras. 7.358-366)  By contrast, the EC – Tariff Preferences panel appears to have taken the view that the existence of any "condition," in and of itself, violates Article I:1 (although it talked about non-discrimination as well).  (See paras. 7.58-60)  It's less clear what the Indonesia – Autos and Belgium – Family Allowances panels thought of this issue.  Arguably, their statements could be taken either way.  (See paras. 14.143-147 of Indonesia – Autos and para. 3 of Belgium – Family Allowances).

Getting back to the iron ore example, let's say that China grants lower tariffs for iron ore imports where there are long-term contracts.  In a sense, long-term contracts could be deemed a "condition" for the lower tariffs.  Thus, under one view, such a measure would violate Article I:1 for that reason alone.

In the alternative, taking the Canada – Autos / Colombia – Ports of Entry approach, you could look at whether establishing lower tariffs on this basis has a discriminatory effect on certain countries.  I'm not sure where all of China's iron ore imports come from, and what the impact on specific countries would be, so the result under this approach is more uncertain. 

I couldn't find video of the House Ways and Means hearing on China's exchange rate policy, but I did get my hands on a transcript.  Here are some interesting tidbits:

What should the U.S. do about the China currency issue?

BERGSTEN:

You don't want to launch a trade war. But as I said, it's the Chinese who are being protectionist here.

If we can fashion a sensible strategy, be anti-protectionist. So between now and April 15th I hope you will be strongly urging the Treasury to designate the Chinese, and the other four countries I mentioned.

But also, simultaneously and based on the promise they're going to do that, to go to their allies, the Europeans, some of the other emerging markets, and many developing countries. We've all made the point that bad as the U.S. is hurt by the Chinese misalignment, other countries are hurt worse. This is setup for multilateral alignment. I mentioned the earlier cases, 1971, 1985. Then it was the U.S. versus the world. The U.S. had a big deficit, everybody had a surplus. We wanted everybody else to revalue. Now it's different. It should be the world against China.

…

We should be able to mobilize a coalition of not just the willing, but almost everybody, to join in the IMF and in the WTO to bring multilateral pressure to bear. And if that happens, the Chinese cannot ignore or resist it, as long as it's bilateral U.S., they can't.

As long — if it becomes multilateral, as it should and can be, I believe that changes the whole game. But I do not believe we can launch that multilateral initiative unless we're willing to follow the law of the land, call a spade a spade, stand up ourselves. And then on that basis, go to the potential allies and mobilize themultilateral approach.

Will the U.S. label China a currency manipulator soon?

BERGSTEN:

I actually think there is a reasonable chance this time that the Treasury will designate China as a manipulator. The economic situation has changed. The U.S. is still facing high unemployment, but we're now sufficiently out of the crisis so that an effort with the Chinese I think would not be viewed as a wrecker to the world economy or even to the market. I think people understand and actually expect the United States to pursue an initiative of this type.

How will the U.S. look if it does not label China a currency manipulator:

PRESTOWITZ:  

I would say in terms of the immediate questions, should China be labeled a currency manipulator? I don't see how the president can avoid doing so. Everybody knows that Chinais manipulating its currency. If the president fudges that, he looks weak, and — and dishonest. And so I don't see how he can really avoid that.

FERGUSON:

Well, I think if we don't label China a currency manipulator, we will look like the wimps of the Western world. So it's our credibility that will really be the — the biggest problem, and I think that's the — the most powerful argument.

What are the implications of bringing a WTO complaint:

BERGSTEN:

We want to go through the WTO rules as you said. There is a clear provision — Article 15 of the WTO that proscribes the kind of practices that China is now carrying out.

Would it be effective to take a case? Would we win the case? It's never been tried. We don't know. I'm not optimistic we would win the case in a legal sense. But using it to multilateralize the issue, and publicize, name and shame the Chinese causing the problem I think ought to be part of our strategy.

LEVY:

… There is a serious downside risk to taking a case to the WTO, which is we do not have clear language at the WTO delineating exactly which conditions are acceptable and which are unacceptable. The U.S. could lose either way.

If we lose the case, we'll never hear the end of it from China about how their practices have been justified. If we win the case, we will have established the precedent of panel overreach that we are counting on dispute settlement panels to essentially legislate and come up with rules.

The importance of keeping this issue multilateral rather than singling out China:

Rep. Boustany: …

I think Dr. Bergsten, you mentioned in your — your paper — your testimony — your written testimony Hong Kong, Taiwan, Singapore,Malaysia. Would that be a more prudential approach for Treasury rather than just simply labeling China? And I would throw that question out for discussion.

BERGSTEN: As I said, those other countries de facto track the Chinese currency . And they have also experienced huge increases in their reserves they manipulated. So it would be perfectly legitimate to name them. I think it would be much in the U.S. economic interest to name them, and get them to revalue. Because as I said when you add them up, they almost double the ante in terms of interms of trade flows and potential pay off.

I think it would also be politically good to group China with some others, and not be singling out China. De facto you would be singling out what I would call a China block. You wouldn't call it that. But de facto, you would do it. I don't actually think you have to do it, because if the Renminbi rises, the others will shadow it and go up along with it in practice.

What's the relative value of the IMF and the WTO in resolving the issue?

FERGUSON:

I don't think there's any harm in going to the IMF, but I don't think any much will come of this. The IMF is only able to exert leverage over countries that are in deficit and in crisis, and they're usually smallish countries, and there are plenty of those it has to concern itself with right now.

The difference is that the WTO is a body quite differently constituted that is able to impose decisions on the biggest countries, including the United States when it's violated its WTO obligations.The WTO is the most powerful of all the international economic institutions, and that's why it's actually our best channel.

The role of the trade deficit in all of this:

[Someone whose name was not picked up in the transcript]:

… if we had a trade surplus with China, this would still be a problem. The real issue here is a distortion of trade.

How did the last Chinese currency revaluation happen:

Rep. Kind:

… it's not unprecedented for China to takesome revaluation in their currency. From '05 to '08, they had about a 20 percent increase alone. What made it possible then, the conditions then, that make it hard for them to do something comparable today? …

LEVY: I think that they did recognize the difficulties that came with the — what was really an unwise currency policy. And I think there was constructive U.S. diplomacy to help address some of the concerns that they had.

Some general thoughts on U.S. – China relations:

FERGUSON:

I think we also need to be very wary of the more aggressive and the pugnacious attitude of the Chinese today. Not only with respect to Google, but also, I believe, across a broad range ofissues from Taiwan to Tibet. The Chinese authorities are spoiling fora fight and the United States Congress must be very, very careful about giving it to them.
 

From his written testimony at the House Ways and Means hearing on China's exchange rate policy:

We have a WTO, but what we really need is a world globalization organization.

…

Over the longer term, the currently prevailing half-free trade, half-mercantilist system of globalization must be replaced by the establishment of a one economy-one system regime. To do this the WTO will have to be completely revamped with new standards, rules, and authority. Most Favored Nation and National Treatment standards are no longer sufficient. There must be just one kind of WTO Treatment in all economies. Global rules must be created to break up and regulate cartels. Distribution and marketing channels must be equivalently open in all markets not only de jure but de facto. It must be possible to appeal on such issues not just to national courts but to objective international dispute settlement bodies. Sovereign investment funds and state controlled enterprises must be subject to international scrutiny and to transparency and rules that assure they are operating completely outside the political realm. Likewise, tax holidays, capital grants, and other financial incentives used to bribe global corporations with regard to location of plants, labs, and headquarters must be subject to common WTO and IMF discipline. Nor should the WTO and other international bodies wait for complaints to address these issues. Rather, they should maintain continuous monitoring of real market developments and apply discipline wherever and whenever necessary.

At first glance, I thought he was proposing a major expansion of WTO rules, but I now realize the references to cartels and distribution channels are not all that new, as they are issues that have come up in various contexts before.  Similarly, state enterprises and subsidies are already covered; he just wants to expand the rules.

On the other hand, if I'm reading the last two quoted sentences correctly, he seems to be proposing a kind of "world trade prosecutor," who can take action indepently of a complaint by a government.  Now that would be a radical transformation of trade rules!

He is skeptical that a WTO complaint under GATT Article XV would be useful.  From a WSJ op-ed:

The second possibility is that the U.S. would—as the new Congressional proposals also contemplate—sue China in the WTO alleging that China's exchange actions are inconsistent with China's international obligations under the WTO treaty. A provision in part of that treaty, the General Agreement on Tariffs and Trade, states that WTO Members "shall not, by exchange action, frustrate the intent of the provisions of" the treaty. This provision has been part of the GATT for more than 60 years, but it has never been the subject of dispute settlement. There is no clear understanding among WTO Members of what it means.

The legal challenge for the U.S. in bringing such a suit would be two-fold. The Obama administration would have to convince the WTO judges that the word "frustrate" in this provision means what the U.S. thinks it means. Furthermore, the U.S. would have the burden of proving that China has, by its exchange actions, caused such frustration.

And he also worries about the ramifications of a case:

… Does the U.S. want other members to claim that the new U.S. push for exports, coupled with low U.S. interest rates, is another form of currency manipulation?

From a recent Congressional Research Service (CRS) report by Jonathan Sanford on Currency Manipulation: The IMF and WTO, here is some brief analysis of WTO legal issues.

SCM Agreement Articles 1-3:

Whether currency disputes fall under the WTO’s jurisdiction is a debatable issue. The WTO rules specify that countries may not provide subsidies to help promote their national exports. Most analysts agree that an undervalued currency lowers a firm’s cost of production relative to world prices and therefore helps to encourage exports. It is questionable, however, where currency undervaluation is an export subsidy under the WTO’s current definition of the term.4

The term “subsidy” has a precise definition in the WTO. It requires that there must be a financial contribution by a government to the exporter or some other form of income or price support. Government financial support can take a variety of forms, such as direct payments to the exporter, the waiver of tax payments or special government purchases or the provision of low-cost goods or services (other than general infrastructure) that lowers the cost of production. Currency manipulation would not appear to qualify under the WTO definitions.

In addition, an export subsidy is a subsidy that is “contingent on export performance.” In the case of an undervalued currency, everyone who exchanges money will be affected by the current exchange rate no matter whether they are buying or selling and no matter whether or not they are involved in international trade. While subsidies must be “specific to an industry” to be actionable in the WTO, a prohibited subsidy, such as an export subsidy, is considered to be specific per se.

GATT Article XV:

As it is used in GATT Article XV, the term “exchange arrangement” refers to issues that are the sole province of the IMF. Thus, one could argue that the meaning of the term in the GATT should reflect its current meaning at the IMF and not the meaning prevalent in 1947. An undervalued currency encourages exports by reducing their cost and it discourages imports by making them more expensive than they might be otherwise. Consequently, one might argue that countries with this type of exchange arrangement are engaging in “exchange action” that may have the effect of frustrating “the provisions of the [GATT] agreement.”

There has never been a definitive ruling by the GATT or WTO on the meaning of Article XV,
including how provisions of the GATT agreement might be frustrated by exchange action. Some might argue that currency undervaluation raises the price of imports in a way that unilaterally rescinds tariff concessions approved during multilateral trade talks.

Accordingly, a case could be made that the WTO should use the broader meaning of the term “exchange arrangements” and take currency valuation arrangements into account in its dispute settlement process. There has also been increased interest, in recent years, in the issue of currency manipulation and its impact on world trade and financial relationships. It could be argued, therefore, that this might be an appropriate and perhaps auspicious moment for issues relating to the trade impact of currency manipulation to be raised in the WTO dispute adjudication process.

It's going on right now, and it's fascinating.  There's so much being said that it's hard to summarize.  Not sure I'll be able to, at least not right now.  You can watch it here [ADDED: Now that it's over, the video link seems to have disappeared, but I'll add a link again if I can find one].  Some brief excerpts from the written testimony:

Niall Ferguson:

It is for these reasons that I would urge the United States to pursue currency realignment on a multilateral rather than solely on a bilateral basis, using the G20 rather than just a Sino-American “G2” as the appropriate forum. After all, we should not fetishize the renminbi-dollar exchange rate.6 The U.S. trade deficit is growing again not only because of China but also because of relatively high oil prices. The rise of China as an exporter of manufacturers has probably hurt other Asian exporters as much as, if not more than, it has hurt the United States. And if China were to increase its imports, the United States would not be the principal beneficiary.

Phil Levy:

Many of the policies currently under discussion would, in fact, be harmful. Other policies that stand a reasonable chance of doing good are likely to take a frustrating amount of time. We would be wise to show patience and pursue an approach that relies upon multilateral diplomacy.

Clyde Prestowitz:

Negotiations similar to those of the Plaza Agreement of 1985 should be launched immediately to coordinate a substantial (40 to 50 percent) revaluation of a number of managed Asian currencies versus the dollar and the euro over the next two to three years. This would also have to entail an agreement to halt strategic currency management activities. A second longer term objective of the deal would be a reversal of savings and consumption patterns in the United States and Asia.

…

If starting such discussions proves difficult, the United States in concert with other affected countries could initiate unfair trade actions under their domestic laws and also under the anti-subsidy and nullification and impairment provisions of the WTO. It could also formally call for official consultations by the IMF with certain of its members regarding their currency management practices. This, of course, would be strong medicine, but it would surely stimulate discussion, and it is all perfectly legal and in keeping with both the rules and spirit of open, rules based trade.

Fred Bergsten:

Hence I would recommend that the Administration adopt a new three-part strategy to promote early and substantial appreciation of the exchange rate of the RMB:

1. Label China as a “currency manipulator” in its next foreign exchange report to the Congress on April 15 and, as required by law, then enter into negotiations with China to resolve the currency problem.9

2. Hopefully with the support of the European countries, and as many emerging market and developing economies as possible, seek a decision by the IMF (by a 51 percent majority of the weighted votes of member countries) to launch a “special” or “ad hoc” consultation to pursue Chinese agreement to remedy the situation promptly. If the consultation fails to produce results, the United States should ask the Executive Board to decide (by a 70% majority of the weighted votes) to publish a report criticizing China’s exchange rate policy.10

3. Hopefully with a similarly broad coalition, the United States should exercise its right to ask the World Trade Organization to constitute a dispute settlement panel to determine whether China has violated its obligations under Article XV (“frustration of the intent of the agreement by exchange action”) of the WTO charter and to recommend remedial action that other member countries could take in response. The WTO under its rules would ask the IMF whether the RMB is undervalued, another reason why it is essential to engage the IMF centrally in the new initiative from the outset.

For those who are into this sort of thing, the U.S. – Poultry from China (DS392) dispute has a very interesting issue related to the examination of domestic law.  In this case, one of the arguments made by the United States was that the statutory provision at issue, which is part of some appropriations legislation, is designed to provide Congressional "oversight" of a U.S. regulatory agency through the appropriations process.  (DSC subscribers can see this post for more background). The U.S. first written submission has some detail about how U.S. appropriations law works, both in general and in this case.  As a result, the WTO panel may have to examine the relationship of the legislative branch to the executive branch in the context of U.S. law-making.  No doubt the panel will tread very carefully in addressing this issue.

Let's say you are a government who is concerned about the WTO-consistency of a particular measure of a trading partner.  You'd really like for that measure to be found in violation of WTO rules. Does bringing additional, less convincing, claims against other measures (perhaps related to the first measure, perhaps not) increase the chances that you'll win the claim you really care about?  The theory is that the panel can "split the difference" by finding a violation for the claim you really want to win, but rejecting the other claims, thereby seeming to give both sides something.

I'd be curious to hear if somebody has ever tried to answer this question, empirically or otherwise.