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Trade, Economics and Environment

Avoiding a Rush to the Exit – Article 50 and the UK’s Withdrawal from the EU

by Larry Helfer

[Laurence R. Helfer is the Harry R. Chadwick, Sr. Professor of Law at Duke University and a permanent visiting professor at iCourts: Center of Excellence for International Courts at the University of Copenhagen.]

As the world reacts to the shock of the Brexit referendum, international lawyers are turning their attention to the mechanics of Britain’s departure from the EU.  Article 50 of the Lisbon Treaty – the clause governing withdrawal – is now front page news.  A state’s decision to leave any international organization raises thorny questions of law and politics.  As I explain below, Article 50 answers some of these questions for withdrawals from the EU, but leaves many others unresolved.

The basics of Article 50

EU law was originally silent as to whether a state could leave the Union, generating debate over whether there was an implied right to exit.  Article 50(1) settles this issue, providing that “any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.”

Under Article 50, the decision to quit the EU is not self-executing, nor does it have immediate effect.  Rather, the exiting country must first “notify the European Council of its intention” to leave, which triggers a process for negotiations over withdrawal.  The hope, set out in Article 50(2), is that the remaining EU members and the departing nation will “conclude an agreement … setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”  That agreement must be approved by a “qualified majority” of the Council (20 of the 27 remaining EU members), by the European Parliament, and by the UK itself.

Article 50’s third paragraph specifies that the Lisbon Treaty (and, by implication, all other EU laws) “shall cease to apply” to the exiting state on the date the withdrawal agreement enters into force.  If no agreement is reached, EU membership ends “two years after the notification” of withdrawal – unless the Council and the UK unanimously agree to an extension.  Once the UK has officially departed, it can rejoin only by following the Lisbon Treaty procedures applicable to states seeking admission to the EU for the first time.

The least worst outcome – bargaining for an orderly withdrawal

By setting the ground rules for Britain’s withdrawal, Article 50 is already shaping talks between London and Brussels over the terms of the UK’s exit.  The effects can be roughly divided into three time periods:  the pre-notification period, the negotiations phase (what one reporter waggishly calls the UK’s departure lounge), and the post-exit relationship between the Britain and the EU.

Brexit supporters did not wake up to an EU-free Britain on the morning after the referendum.  The UK is still a fully-fledged member of the Union – and it will remain so if the British government does not formally notify the European Council of its intent to withdraw.  Article 50 says nothing about how, when or by whom such notification is to be made.  Presumably, notice would be given by the Prime Minster.  Before the vote, David Cameron stated that he would inform the European Council “straight away” after a “leave” vote.  But on Thursday he announced that notification would be given by his successor, who will take office by October 2016.

Why the change?  Having campaigned against Brexit and lost, it is not surprising that Cameron wants someone else to pull the trigger on the UK’s withdrawal and squelch any campaign to block withdrawal – a possibility raised by Scotland’s First Minister Nicola Sturgeon.  But even fervent British sovereigntists would be advised to support some delay in notifying the Council.  So long as the UK has not fired the starting gun on the two-year exit clock, it has the upper hand in negotiations with the other 27 EU nations.  Britain keeps both the benefits and the burdens of EU membership while the terms of its departure are hammered out.  It can’t be forced to leave the Union (or can it? – see below) unless those terms are to its liking.

Once notice is given, however, the advantage shifts to the continent.  If Britain and its former EU partners do not reach a deal within 24 months – or unanimously agree to extend negotiations – the UK is out.  A divorce that is finalized while the spouses are still squabbling over custody of the children and the division of marital property is messy and painful.  The equivalent for a non-negotiated Brexit – the sudden re-imposition of barriers to free movement of capital, goods and labor – is an outcome that even diehard British nationalists should want to avoid.

How long can the UK defer notification?  Article 50 doesn’t say, but politics rather than law will almost certainly provide the answer.  Both pro-Brexit voters and EU leaders are unlikely to oppose a modest delay.  But the uncertain economic and political fallout of a protracted British withdrawal will push both sides to the bargaining table regardless of when the UK gives notice – unless the British public catches a bad case of “Regrexit.”

Contrary to what some have claimed, however, the exit negotiations need not conclusively resolve London’s status vis-à-vis Brussels.  Article 50(2) requires a withdrawal agreement that “tak[es] account of the framework for [the UK’s] future relationship with the Union.”  An deal that takes plausible steps toward defining that relationship should suffice, even if it is a modus vivendi whose principal aim is an orderly disengagement.  The details of the Britain’s post-withdrawal status can be finalized at a later date – although in the interim EU law will cease to apply to the UK.

Avoiding a rush to the Brexit

As described above, Article 50’s withdrawal rules, although incomplete, do a reasonably good job of channeling the parties toward a political settlement of the UK’s departure over the next several years.  But some in the pro-Brexit camp are calling for more precipitous action, including introducing an EU Law (Emergency Provisions) Bill in the current session of the British Parliament to revise the European Communities Act 1972.  The Bill aims to “immediately end the rogue European Court of Justice’s control over national security, allow the Government to remove EU citizens whose presence is not conducive to the public good (including terrorists and serious criminals), [and] end the growing use of the EU’s Charter of Fundamental Rights to overrule UK law ….”

There is no doubt that Parliament has the power to adopt such a Bill.  But from an international perspective, the enactment would rightly be seen as a grave violation of EU law, which continues to bind the UK until an exit deal is finalized or, failing that, two years after a notification of withdrawal.  The Bill would surely trigger a raft of lawsuits, by the EU Commission and by private litigants, challenging its legality and seeking fines and damages.  How would British judges respond to such suits?  The Bill would force UK courts to choose between their duty to apply EU law over conflicting national law and their obligation to defer to Parliament.  The result, as Cambridge professor Kenneth Armstrong has warned, would be a constitutional conflict of the first order.

The Bill might also provoke the remaining EU members to try to force Britain out.  The EU has no expulsion clause; one was considered but ultimately left out of the Lisbon Treaty.  But as my coauthors and I explain in a recent working paper, it is unsettled whether international law recognizes an implied right to expel.  And European leaders could attempt to achieve the same result indirectly, treating the Bill as a material breach that authorizes a suspension or termination of the Lisbon Treaty vis-à-vis the UK.  In either case, the legality of any expulsion effort would almost certainly be challenged in court.

In all events, the far better course for all concerned is to avoid a precipitous unilateral break and instead to negotiate Britain’s orderly departure from the EU.

Should the U.S. Approve a Commercial Moon Mining Venture?

by Chris Borgen

Well, Julian beat me to the punch by a few minutes, but here’s my take…

The Wall Street Journal reports:

U.S. officials appear poised to make history by approving the first private space mission to go beyond Earth’s orbit, according to people familiar with the details.

The government’s endorsement would eliminate the largest regulatory hurdle to plans by Moon Express, a relatively obscure space startup, to land a roughly 20-pound package of scientific hardware on the Moon sometime next year.

It also would provide the biggest federal boost yet for unmanned commercial space exploration and, potentially, the first in an array of for-profit ventures throughout the solar system.

Moon Express is a company looking towards extracting resources from the moon. They explain on their website:

Most of the elements that are rare on Earth are believed to have originated from space, and are largely on the surface of the Moon. Reaching for the Moon in a new paradigm of commercial economic endeavor is key to unlocking knowledge and resources that will help propel us into our future as a space faring species.

There are a variety of different business models for the growing commercial space industry. Some companies are focused on providing launch services for ferrying cargo and crew to orbit and beyond (SpaceX, United Launch Alliance), others have models based space “tourism” (Virgin Galactic), or providing the modular building blocks of space habitats (Bigelow Aerospace) or extracting resources from asteroids or the moon (Planetary Resources, Moon Express). It is this last business model, resource extraction,  that particularly challenges existing regulatory structures, the Outer Space Treaty and  the Moon Agreement.

The U.S. is not a party of the Moon Agreement. However, it is important to note that the Agreement states, in part:

Article 11

1.       The moon and its natural resources are the common heritage of mankind, which finds its expression in the provisions of this Agreement and in particular in paragraph 5 of this article.

2.       The moon is not subject to national appropriation by any claim of sovereignty, by means of use or occupation, or by any other means.

3.       Neither the surface nor the subsurface of the moon, nor any part thereof or natural resources in place, shall become property of any State, international intergovernmental or non-governmental organization, national organization or non-governmental entity or of any natural person. The placement of personnel, space vehicles, equipment, facilities, stations and installations on or below the surface of the moon, including structures connected with its surface or subsurface, shall not create a right of ownership over the surface or the subsurface of the moon or any areas thereof. The foregoing provisions are without prejudice to the international regime referred to in paragraph 5 of this article…

7.       The main purposes of the international regime to be established shall include:

           (a)    The orderly and safe development of the natural resources of the moon;

           (b)    The rational management of those resources;

           (c)    The expansion of opportunities in the use of those resources;

           (d)    An equitable sharing by all States Parties in the benefits derived from those resources, whereby the interests and needs of the developing countries, as well as the efforts of those countries which have contributed either directly or indirectly to the exploration of the moon, shall be given special consideration.

[Emphases added.]

Julian and others discussed similar provision in the Outer Space Treaty in relation to asteroid mining in  these posts and  comments: 1, 2.

Based on this text,  some have argued that one cannot mine the Moon or asteroids for private profit.  Julian has set out in his posts an interpretation of the OST language that would allow private ventures.  Others, such as Richard Bilder, have concluded that the regulatory uncertainties regarding mining the Moon argues in favor of constructing a clear multilateral legal regime.

International law can play an important role in this burgeoning field. Rather than attempting to ban such mining enterprises, international law can provide a framework so that such ventures can have greater certainty and better assess risks, as well as have certain limits on their activities. A multilateral agreement can recognize the property rights of companies extracting resources, define where resources can and cannot be extracted, define a regime of noninterference among mining ventures (there are broader noninterference norms in the existing OST and Moon Agreement), and so on. Such an agreement would appreciate the opportunities of this new frontier of exploration and economic activity but also provide some reasonable bounds to avoid conflict, avoid the wasteful degradation of asteroids or the moon, and ban certain activities that could endanger the public. I am skeptical of any attempts, though, at large-scale wealth redistribution. That did not work in the UN Convention on the Law of the Sea (and needlessly hampered the acceptance of an important treaty)  and I see no reason why there would be a different outcome here.

This is why the U.S.’s taking a step forward to approve a private mission my a moon mining company has significant implications.  The Journal continues:

The expected decision, said the people familiar with the details, is expected to set important legal and diplomatic precedents for how Washington will ensure such nongovernmental projects comply with longstanding international space treaties. The principles are likely to apply to future spacecraft whose potential purposes range from mining asteroids to tracking space debris.

Approval of a formal launch license for the second half of 2017 is still months away…

But this is only the first of many steps that U.S. companies may be taking in private space exploration. Elon Musk has announced that SpaceX plans to send an uncrewed lander to Mars around 2018 and a crewed mission around 2026. If that timetable holds, and if states do not jumpstart their Mars programs then the first person on Mars will have been sent by a private company, not a national space program (The key word, of course, being “if.”) I believe the current NASA scenario is to land a crew sometimes in the mid 2030’s.

Although US companies are currently the main actors in these private space ventures, that will not always be the case.  These are early days, still. The “commercial space race” is still among toddlers. But those baby steps quickly become small steps. And then giant leaps.

To answer the question of the title of this post: should the U.S. approve this commercial moon mining venture? If it meets U.S. regulatory requirements and in the absence of clear international law to the contrary: Yes.

But it is also in the interest of American companies, and the US as a whole, to clarify multilateral regulations concerning the commercial exploitation of the Moon and other celestial bodies.  Now is the time to define some ground rules for everyone in the space race.

 

U.S. Government Prepares to Approve First Private Space Expedition to the Moon

by Julian Ku

This is big.  Huge, even. From the Wall Street Journal:

U.S. officials appear poised to make history by approving the first private space mission to go beyond Earth’s orbit, according to people familiar with the details.

The government’s endorsement would eliminate the largest regulatory hurdle to plans by Moon Express, a relatively obscure space startup, to land a roughly 20-pound package of scientific hardware on the Moon sometime next year.

The main obstacles to this commercial moon mission are not technical or financial. The main problem appears to be legal.  First, the U.S. government must approve the launch (this appears to be happening soon).  Second, the U.S. and the world need to figure out how to regulate commercial exploitation of the moon, because companies like “Moon Express” are not in this for the science alone.  The Moon Treaty seems to prohibit any commercial exploitation of the Moon’s resources under Article 11 (“[N]atural resources of the moon… shall [not] become the property of any ..person”), but the U.S. never ratified it and neither did any of the other major spacefaring nations.

So we are left to the “Outer Space” treaty, which the U.S. did join, but which has much less emphatic limitations on commercial development of celestial resources (as I argued here and here).  I think it is safe to say commercial exploitation of the moon and asteroids is going to happen sooner than we think (starting next year?).  The law will have to catch up later.

Apple Rejects Game Where You Play a Palestinian

by Kevin Jon Heller

palestinegameThe game in question — from which the screenshot is taken — is entitled Liyla and the Shadows of War. Here is how the gaming magazine Hardcore Gamer describes it:

Liyla and the Shadows of War is a short, dark game about exactly what the title implies. You play as a father running home through a war zone attempting to collect his family and get them to safety as the bombs fall and the drone strikes mow down anything that moves.

[snip]

At the start I navigated a few platforming sections, figured out how to avoid gunfire, made a couple of story choices, and even did a simple auto-run section where I had to control the jumping of two characters simultaneously. Of the 30-ish minutes of using the app, this was about 28 or so. The final two  minutes (and it might have been less, I wasn’t running a timer) were spent reading.

A game, right? Not if you’re Apple, apparently:

CiwVR6mUUAA4j4pThe gaming community is mocking Apple’s decision, and rightfully so. As Hardcore Gamer points out, “Liyla and the Shadow of War is a game. Having a serious message about a real-world conflict doesn’t make it any less so, and it’s insulting not just to the developers but to gaming in general to say otherwise.” Indeed, there is no way Apple actually believes that Liyla and the Shadow of War isn’t a game; it simply doesn’t want to host a game developed by a Palestinian that encourages thinking critically about Israel’s violence toward Palestinians. But rejecting the game on political grounds would itself be seen as political — correctly — so Apple comes up with a ridiculous pretext for rejecting it and hopes nobody notices.

I know what you’re thinking: doesn’t Apple has the right to avoid “political” games? Isn’t it smart business to stay out of the Israel/Palestine conflict?

Fair question. And in response I give you this:

screen568x568 (1)

Meet Israeli Heroes, an Angry Birds rip-off in which — according to Boing Boing — “you hurl cartoon missiles at vaguely Arabic-looking adversaries.” Currently available for free on iTunes.

So much for Apple’s political neutrality.

Liyla and the Shadow of War is still available for Android on Google Play. I haven’t tried it yet, but it has a 4.9 average from 333 reviews, so it’s obviously good. Check it out. Maybe you’ll have fun playing and learn something about life in Palestine in the process.

Which is precisely what Apple doesn’t want you to do.

The $50 BILLION Treaty Interpretation Question: Dutch Court Sets Aside Yukos Award Against Russia

by Julian Ku

Russia scored a huge victory today when the Hague District Court in the Netherlands court set aside a $50 billion arbitral award in favor of former shareholders of Yukos.  The $50 billion Yukos award (that’s BILLION, with a “B”),  is the largest arbitration award ever issued, was issued under the authority of the Energy Charter Treaty.  The arbitral tribunal (hosted at the Permanent Court of Arbitration) had found that the Russian government was liable for expropriating the former shareholders of Yukos through use of tax laws, harassment, criminal punishments, and other government measure without providing adequate compensation.

The Hague District Court set aside the award on jurisdictional grounds.  According to this English-language summary, the Dutch court held that Russia was not bound to arbitration under the Energy Charter Treaty because it never ratified the ECT.  The arbitral tribunal held in its interim award that Russia was bound under Article 45, which calls for provisional application of the treaty pending ratification.  But the Hague District Court disagreed.

Here is Article 45(1) and (2)(a):

(1) Each signatory agrees to apply this Treaty provisionally pending its entry into force for such signatory in accordance with Article 44, to the extent that such provisional application is not inconsistent with its constitution, laws or regulations.

(2) (a) Notwithstanding paragraph (1) any signatory may, when signing, deliver to the Depository a declaration that it is not able to accept provisional application. The obligation contained in paragraph (1) shall not apply to a signatory making such a declaration. Any such signatory may at any time withdraw that declaration by written notification to the Depository.

Russia did not make such an Article 45(2) declaration, but the Dutch Court held that Article 45(1) still acted as a jurisdictional bar on the arbitral tribunal’s jurisdiction because it requires the arbitral tribunal to go back and assess whether the dispute resolution provision (Article 26) of the Energy Charter treaty is “inconsistent” with Russia’s “constitution, laws or regulations.”  the Dutch court concluded that Russia’s constitution does not permit it to be bound to an arbitration assessing the legality of its tax laws without the consent of its legislature.

I don’t have a strong view on who is right here. I will note that Russia is represented by the well-known New York law firm Cleary Gottlieb (where I once toiled as a young summer associate) and that Russia mustered an impressively long list of international law experts on its behalf such as Martti Koskenniemi, Alain Pellet, and Gerhard Hafner (to list just a few).  The claimants had their own impressive list including James Crawford and my former Yale professor Michael Reisman.  This is a truly difficult treaty interpretation question, which just happens to have $50 billion riding on it.  So we can be sure there will be an appeal of the Hague District Court’s ruling.

It is worth noting that also that Russia has a lot riding on this case, but it also decided to litigate this matter fully even though it believes the tribunal has no jurisdiction.  This turns out to be a smart move, since they seem to have won (for now) and because not litigating would have still subjected them to lots of enforcement actions against them around the world. So litigation seems to have worked out for Russia this time. I wonder if that will encourage Russia  to try its hand at litigation in future cases as well?

 

When A.I. Met R.O.I.

by Chris Borgen

Over the years a few of us have written issues concerning battlefield robots. (See, for example: 1, 2, 3, 4, 5.)  Sometimes, we had links to remarkable videos of quadruped robots stomping through forests. Those robots and videos were made by Boston Dynamics, a company that started from an MIT research group.

Besides its designing quadruped robots, Boston Dynamics gained further renown when, in 2013, it was acquired by Google as part of that company’s broad push into robotics. Just last month, one of Boston Dynamics’ new videos wen viral; it highlighted its two-legged Atlas robot walking indoors, on snowy hillsides, lifting and stacking boxes, and being pushed by a human (and righting itself). Yesterday, Google announced that it was selling Boston Dynamics. Why? And what does this say about all the prognostications about the rise of the robots, either on the battlefield or in the workplace?

At its most basic level, the story here seems to be as much about the difficulties of post-acquisition integration of business cultures and goals as it is about robotics. An article in Bloomberg Business notes:

Executives at Google parent Alphabet Inc., absorbed with making sure all the various companies under its corporate umbrella have plans to generate real revenue, concluded that Boston Dynamics isn’t likely to produce a marketable product in the next few years and have put the unit up for sale, according to two people familiar with the company’s plans.

After Boston Dynamics’ 2013 acquisition, it was made part of Google’s broader robotics initiative, called Replicant. (Query whether naming the division after the murderous androids of Philip K.Dick’s dystopian classic Do Androids Dream of Electric Sheep, which became the movie Blade Runner, was a good idea.) Bloomberg Business explains:

At the heart of Replicant’s trouble, said a person familiar with the group, was a reluctance by Boston Dynamics executives to work with Google’s other robot engineers in California and Tokyo and the unit’s failure to come up with products that could be released in the near term.

While the issue inside of Google was less about the technology of artificial intelligence (AI) than about the return on the investment (ROI) of the robotics company acquisitions, according to Bloomberg Business the Atlas video did cause concern among some of the public relations folks at Google over whether humanoid robots  would be perceived as taking jobs from real human. Plus, as one PR person put it, some people found the robot “terrifying.” (Yeah, that “Replicant” name-choice seems increasingly like a bad idea. At least they didn’t call the business unit the “Terminator Division.”)

Many  have spent time writing and talking about the legal issues related to the use of remotely controlled or autonomous battlefield robots. The immediate issues stemmed from the use aerial drones, of course, but on the horizon has been the possibility of robots being deployed in ground combat (as opposed to in bomb demolition, or other areas where remotely controlled units are already deployed). I am all for lawyers anticipating issues caused by technological change. But before we get there, there are a host of legal issues concerning the transactions that will support the R&D that will develop this technology. With the potential sale of Boston Dynamics to Toyota, it bears noting that the immediate legal issues may have to do more with international business transactions than international humanitarian law.

Seeking the Regulatory High Ground: the International Civil Aviation Organization and Commercial Spaceflight

by Chris Borgen

In 1958, Air Force Chief of Staff Thomas D. White wrote: “For all practical purposes air and space merge, form a continuous and indivisible field of operations.” White later coined the term “aerospace” and used it in a Congressional hearing. Later it was used in policy papers to explain why the U.S. Air Force would also have the responsibility for space issues. (William Burrows, The New Ocean, 248.)

The International Civil Aviation Organization, a specialized agency of the UN, has just made a similar giant leap from air into space. Agence France Press reports that in a March 15 speech at the Second Annual Aerospace Symposium (there’s that word again) co-sponsored by ICAO and the UN Office on Outer Space Affairs (UNOOSA), ICAO Council President Olumuyiwa Benard Aliu said:

The International Civil Aviation Organization “recognizes that sub-orbital and outer space flights will foster new tourism and transport markets, and that investments in related research and development remain at a very healthy level,”…

“Personally, as an engineer, I am very excited to see the dream and theory of normalized space flight now becoming such a tangible reality,” he told an aerospace symposium in Abu Dhabi.

In making its case, the agency noted an uptick in the number of spacecraft designs that have made the leap from concept to reality, saying more will follow.

As SpaceNews put it: ICAO is “spreading its wings into commercial spaceflight.” Thinking holistically about the continuum of air and space activities does make sense. Virgin Galactic’s space planes and SpaceX’s and Blue Origin’s returnable, reusable rockets will have significant activities within the atmosphere as well as in space. And, so, we see domestic and international organizations adapting.

That adaptation is itself an interesting story. ICAO’s mandate is focused on aviation. Its vision statement is to “[a]chieve the sustainable growth of the global civil aviation system.” Even its 2014- 2016 strategic objectives make no mention on of space– or aerospace. However, Agence France Press reports that at the ICAO/ UNOOSA conference, the ICAO leadership stated that:

Rules must be put in place soon to ensure safety and security in space, as well as prevent the creation of a patchwork of regulations by individual states..

The agency suggested adapting the existing regulatory framework for aviation, for which the ICAO and national governments are responsible.

ICAO, as it stands, does not have enforcement authority. It studies,  fosters coordination and  develops policies and standards.

While there has been a focus on certain potential future space activities, such as asteroid mining, and their relation to the Outer Space Treaty, is there a need for a new treaty covering launches and activities such as space tourism? In the U.S., there seems to be a concern that too much regulation of the space tourism and orbital launch services could stifle the nascent industry. According to R&D:

Both the Federal Aviation Administration and the recently passed commercial-space competitiveness legislation from the U.S. Congress keep their distance from regulating space tourism, “as long as passengers receive explicit warnings about the hazards and the vehicles have basic safeguards,” the Wall Street Journal reported.

And so there are likely two discussions that will be taking place in the coming months. The first will concern the an institutional question: should ICAO become a norm-setter in regards to space activities? The second will address a set of regulatory issues: do we need a new treaty on aerospace activities, space tourism, and launch activities? Could consultation and coordination among national regulators be enough?

Stay tuned…

Can/Will President Sanders Withdraw the U.S. from the WTO?

by Julian Ku

It’s been a rough U.S. presidential campaign season for free traders.  Very few of the candidates are willing to voice broad support for free trade and free trade agreements.  Populist candidates like Senator Bernie Sanders and Donald Trump have made some pretty ugly noises about either violating or withdrawing from existing trade agreements.

Although Donald Trump’s proposal for 45% tariffs on China would violate WTO obligations (as Roger detailed here), it is Senator Bernie Sanders who might be more radical on free trade.  Although he doesn’t mention it much on the campaign trail, Senators Sanders (as a congressman) has introduced bills in Congress that would have withdrawn the U.S. from the World Trade Organization.

Today, Congressman Bernie Sanders will urge his colleagues in the U.S. House to support a plan to have the United States withdraw from the World Trade Organization.

Sanders acknowledges that the proposal probably won’t pass, but he hopes it will stimulate debate over the nation’s growing trade deficit.

Here a youtube video of his speech defending his proposed bill to withdraw the U.S. from the WTO.

What is interesting is that if elected President, Sanders could probably unilaterally withdraw the U.S. from the WTO with six months notice pursuant to Article XV of the Agreement Establishing the WTO (An earlier version of this post erroneously referred to Article XXXI of the WTO Agreement, which is really the 1947 GATT Agreement. Thanks to the commenter below for the correction).  I think that a President has broad delegated authority to terminate such agreements, although as I noted back in 2008, it is a bit uncertain whether Congress must also approve.    Still, given that the president arguably has such powers, shouldn’t someone ask Senator Sanders whether he still wants to withdraw the U.S. from the WTO, and if so, would he promise to do so if elected?  I have a feeling he has backed off this position (hopefully!), but it is certainly worth asking!

Trump’s Proposed Great Chinese Tariff Wall

by Roger Alford

Chinese Great WallUnfortunately Republican primary voters have made the remarkable choice to take Donald Trump seriously, and therefore we now have little choice but to contemplate the ramifications of a Trump presidency for United States foreign policy.

In terms of U.S. trade, Donald Trump would be an unmitigated disaster. Trump, of course, has a penchant for incendiary comments, and his statements regarding international trade are as ludicrous and uninformed as much of his other foreign policy positions. Almost everything Trumps says about Chinese trade is wrong. “We don’t win anymore,” “They are taking our jobs,” and “They don’t play fair.” These are all platitudes without substance, but a significant percentage of Americans are buying his snake oil. The answer to our Chinese problem, according to Trump, is a trade war. “The only power that we have with China is massive trade,” Trump says, so we should tax China. “I would tax China on products coming in. Let me tell you what the tax should be… the tax should be 45 percent.” The solution to our trade problems with China, he thinks, is to build a tariff wall. Build a wall and make them pay.

Trump thinks that Mexico will pay for the Mexican wall, and he thinks that China will pay for a Chinese tariff wall. But he is wrong. The American people would pay for the wall with higher consumer prices and reduced American exports.

First, how would such a tariff increase impact American consumers? A 45 percent tariff on Chinese products would be an indirect tax on American consumers. On average, the United States imposes a 3.5 percent tariff on foreign products. Over 20 percent of all United States imports come from China, with a total value of over $500 billion. At 3.5 percent, the tariff on $500 billion worth of Chinese imports is $17.5 billion. At 45 percent, the tariff would be $225 billion. That’s an increase of over 1,186 percent. In other words, assuming Chinese imports continued at their current rate, Donald Trump’s proposed tariff wall with China would reflect an indirect tax on American consumers of over $200 billion. A tax increase of over $200 billion would be one of the largest in American history, greater than the combined tax increases imposed by Presidents Obama, Clinton, and Carter.

To be more concrete, as detailed here, the United States imports from China over $135 billion worth of electronic equipment, over $100 billion worth of machinery, over $30 billion worth of furniture, over $25 billion worth of toys, and over $18 billion worth of footwear. All of us routinely purchase Chinese products, and we each would face a dramatic price increase as the 45 percent tariff is passed on to consumers.

Second, how would the tariff increase impact American exporters? Trump’s tariff wall is undoubtedly illegal under the WTO rules. The rules were designed to make sure that countries keep their trade promises. Donald Trump’s proposal is a blatant breach of our promise to keep tariffs low. All of our tariff rates are “bound,” meaning we have committed by treaty not to increase beyond the bound rate. Every imported product has a bound tariff rate, and under GATT Article II, any tariff above that ceiling violates the WTO rules.

Trump’s proposed tariff wall would break United States’ promise to maintain its current tariff rates. China would have the right to bring an action before the WTO to challenge the 45 percent tariff increase. Just as the United States would undoubtedly win if China tried to do something similar to us, China would undoubtedly win if it challenged the Trump tariff wall. The WTO would demand that the United States keep its tariff promises, and authorize China to raise tariffs on United States’ products coming into China equal to the harm the United States caused to China.

In other words, if China suffers over $200 billion worth of harm from increased tariffs on Chinese products, the WTO would authorize China to increase tariffs on U.S. products by the same amount. Over 7 percent of all United States exports go to China, with total U.S. exports to China exceeding $120 billion.

So if China is hit with over $200 billion worth of tariff increases, China would be authorized to impose over $200 billion worth of tariff increases on $120 billion worth of American exports. Our major exports to China include soybeans ($15 billion), civilian aircraft ($8.4 billion), passenger vehicles ($5.2 billion), copper ($3 billion), corn ($1.3 billion), and coal ($1.2 billion). American workers with jobs in these industries would be severely injured by these WTO-authorized Chinese countermeasures. All those American auto workers, and corn and soybean farmers, and coal miners who support Trump would see their Chinese export market shrink. A tariff increase this dramatic could effectively close the Chinese market to American exports. And it would be completely proper for China to do this to compensate it for our illegal behavior.

In short, the great Chinese tariff wall that Donald Trump proposes to build would severely injure American consumers, making the price of all Chinese products dramatically higher. It also would severely injure American workers, as U.S. exports to the Chinese market would sharply contract. The economic harm that his tariff wall would have on the average American is shocking. Yet his supporters remain blissfully unaware that the United States would not win if it enters a trade war with China.

Climate Change and the Syrian Civil War

by Chris Borgen

Scientific American has published an article by John Wendle on how climate change has spurred the conflict in Syria. Wendle writes:

Climatologists say Syria is a grim preview of what could be in store for the larger Middle East, the Mediterranean and other parts of the world. The drought, they maintain, was exacerbated by climate change. The Fertile Crescent—the birthplace of agriculture some 12,000 years ago—is drying out. Syria’s drought has destroyed crops, killed livestock and displaced as many as 1.5 million Syrian farmers. In the process, it touched off the social turmoil that burst into civil war, according to a study published in March in Proceedings of the National Academy of Sciences USA. A dozen farmers and former business owners like Ali with whom I recently spoke at camps for Syrian refugees say that’s exactly what happened.

He tells a story of environmental degradation, ill-conceived agricultural and water-management policies, and their effects:

“The war and the drought, they are the same thing,” says Mustafa Abdul Hamid, a 30-year-old farmer from Azaz, near Aleppo… “The start of the revolution was water and land,” Hamid says.

But the story Wendle writes is about more than Syria:

The refugee crisis will eventually subside, [Richard Seager,a professor at Columbia University’s Lamont–Doherty Earth Observatory] assumes, and the war in Syria will run its course. Nevertheless, he says, the region’s droughts will be more frequent and more severe for the foreseeable future. After closely studying dozens of climate models he and Kelley and their colleagues are convinced that continued greenhouse gas emissions will widen the Hadley cell, the band of air that envelops Earth’s tropics in a way that could further desiccate the lands of the eastern Mediterranean.

These past months many people have written about the Syrian civil war. Many have written about climate change. Wendle’s article considers both the perspectives of farmers who have become refugees and of scientists studying climate change. It is not only describes where we are, but how we got here, and what may be yet to come.

Highly recommended.

Is the Paris Agreement Historic?

by Daniel Bodansky

Paris

[Dan Bodansky is the Foundation Professor of Law and Faculty Co-Director of the Center for Law and Global Affairs at the Sandra Day O’Connor College of Law at Arizona State University. He is in Paris for the climate change negotiations. This is the sixth in a series of updates both from the U.S. and from Paris. Professor Bodansky has consulted for the government of Switzerland and the Center for Climate and Energy Solutions (C2ES) in relation to the Paris Summit. However, he is writing in his personal capacity and the views expressed do not necessarily represent those of the Swiss government or C2ES.]

COP-21 adopted the Paris Agreement (.pdf) at around 7:30 pm on Saturday night, a remarkably punctual conclusion by COP standards. There was a bit of drama at the end, over a “should” vs. “shall” in one of the provisions (more on that tomorrow), and the final plenary waited for more than an hour while the French presidency, the United States and Brazil tried to work it out. But there was none of the chaos and grandstanding that usually characterizes the end game of climate conferences.

How should we evaluate the Paris Agreement? Certainly, it satisfied the rather modest criteria of success I identified before the conference began. It is a solid outcome, and the French team that led the conference and the negotiators who worked round the clock to finalize the agreement can feel proud of their achievement. Compared to past climate conferences, the Paris conference is definitely cause for celebration.

But is the Paris Agreement historic, as speaker after speaker last night declared? If we focus only on the agreement’s relatively spare contents, it seems hardly the stuff of history. Yes, the agreement does some positive things: it requires countries to put forward “nationally determined contributions” (NDCs) – that is, pledges about what they will do to reduce emissions; it provides for transparency and review, to hold countries accountable for what they say; and it provides for a global stocktaking every 5 years and a process to update NDCs, in order to drive greater ambition over time. But one shouldn’t oversell these results. The NDCs put forward pre-Paris fall far short of putting the world on a pathway to holding temperature change to below 2° C. Countries’ NDCs are not legally binding. There is little new in the agreement on adaptation and finance. And the provisions regarding transparency and review are skeletal, and will need to be fleshed out by subsequent decisions.

Still, despite its relatively modest substance, the Paris Agreement is potentially pivotal, because it completes the paradigm shift from the bifurcated world of the Kyoto Protocol, which rigidly distinguished between “Annex I” and “non-Annex I” countries, to the common global framework that began to emerge in the Copenhagen Accord. The world has changed a great deal from 1992, when the UN Framework Convention on Climate Change was adopted and Annex I defined. Many of the world’s richest countries, like Singapore and Qatar, are still considered “developing” under the Convention’s outdated annexes. And, more importantly, most of the growth in greenhouse gas emissions over the next century will occur in “developing” countries. So reorienting the UN climate change regime to make it truly global is essential to solving the climate change problem.

Getting there wasn’t easy. Many developing countries were extremely reluctant to give up the deal they had gotten in Kyoto. That’s one of the reasons why the negotiations in Paris were so difficult. (Other reasons include the reluctance of donor countries to provide more finance and the need for the US to avoid commitments that might require Senate or Congressional approval.) In order to achieve a common approach, the US and other western countries had to accept somewhat limited provisions on transparency and updating. But this was a small price to pay, if the Paris agreement finally puts the climate regime on a broad-based, durable footing, which can be progressively strengthened over time. If that happens – and, of course, only time will tell – then the Paris agreement will merit the accolades that were showered on it today.

Transparency and Access at the Paris Negotiations

by Hari Osofsky

[Hari Osofsky is a law professor, faculty director of the Energy Transition Lab, and director of the Joint Degree Program in Law, Science & Technology at the University of Minnesota. She is serving as chair of the American Society of International Law’s observer delegation at the 2015 Paris climate change negotiations. Any views expressed are those of the author and do not represent the views of either the University of Minnesota or the American Society of International Law. This is her second post from Paris.]

Expectancy has dominated the last two days as people awaited each day’s new draft of the agreement. Because the negotiations are taking place behind closed doors, people use relationships to learn ever-evolving information about the state of negotiations and timing of draft release and to give input to the small set of party representatives allowed in the negotiating rooms. They also race to gain the tickets that allow them access to the plenary room in which the Comité de Paris takes place, since most observers and many delegation members are stuck watching in overflow rooms. In the spirit of transparency, no one except those compiling the draft receives a copy before its release at the Comité de Paris and the drafts and reports on the consultations have all been posted publicly. I stood in a dinner line tonight with a minister who affirmed that he was looking forward to seeing the new draft.

At the Comité de Paris in which Wednesday’s draft was released, Laurent Fabius, COP 21 President, noted many new areas of convergence (there was a three-quarter reduction of bracketed language) and three remaining cross-cutting outstanding political issues, which are no great surprise: differentiation, financing, and level of ambition. After a second Comité de Paris that went until almost 11:30 pm, party statements reinforced that many key negotiating issues still remained, as Dan Bodansky’s post covered. I too was struck by the number of parties calling for a goal limiting the temperature rise to 1.5 degrees, as well as the level of support for the human rights provisions and REDD+.

State parties worked overnight and a new draft was released Thursday evening, with the time rolling back from early afternoon to 9 pm as people exchanged rumors and information. The same three political issues remain the key areas of negotiation and parties are participating in an Indaba of Solutions (closed to observers, with three exchangeable passes for each party) from 11:30 pm on after two hours to review the document. President Laurent Fabius made clear that the time has passed for general statements, and that this Indaba would focus only on compromise solutions aimed at seeking landing zones. He still aims to produce the final text tomorrow. The new text has even fewer bracketed items, and clearly represents some tough compromises. Notably, for example, human rights are mentioned in the preamble without brackets, but have been removed from the operational Article 2.

Press conferences abound as this COP moves towards its conclusion, reinforcing the sense of energy here. In one of the most high profile press events yesterday, Secretary Kerry formally announced that the U.S. is part of the high-ambition coalition and would double its grant-based adaptation commitments by 2020. The press conference was screened to an overflow audience at the U.S. Center as security excluded all observers from the actual press conference (limited to the press pool).

At the same time the negotiations continue to unfold, side events highlighting cities, states, and corporations, as well as a myriad of specific issues, proliferate inside the restricted Blue Zone, in the public Climate Generations space, and around Paris. As someone trying to go to as many side events as possible on subnational government and corporations (while also attending the very limited number of the official negotiation meetings that I have access to), I am overwhelmed by the number of simultaneous options. Participants in these events, including ones who have been to many COPs, attest to the growing role of these non-nation-state entities and recognition of that role. At the same time, many of them call for greater access and inclusion.

As I return from tonight’s meeting, I want to reflect for a moment on this question of access in a world of increasingly polycentric climate change governance. I worry about what those concentric circles that I referred to in my first guest post mean for stakeholders’ ability to have input into the critical compromises being made as I write. There is a fundamental tension at the core of this issue. On the one hand, closed spaces can help people speak freely in ways needed for compromise. On the other hand, if all these other stakeholders matter to the problem and its solution, are current avenues for input enough?

Non-parties have certainly had some avenues for input here besides back channels and this post is not intended as a criticism of access at this meeting in particular. Observers were given the opportunity to talk with Executive Secretary Christiana Figueres and UNFCCC COP 20 President and current Peruvian Minister of Environment Manuel Pulgar-Vidal Wednesday morning, and Minister Pulgar-Vidal conveyed their input at the Comité de Paris just before the Wednesday evening meeting closed. Meanwhile, advocacy groups, such as the coalition working to shift the countries opposing human rights provisions, continue their campaigns to influence national positions with letters and calls to key officials—as well as by comments on drafts given to those with access to negotiators. And nation-states’ pledges through their Intended Nationally Determined Contributions (INDCs) are foundationally based on conversations that national governments have had with other key governmental and nongovernmental actors.

The access issues in international negotiations, though, are much more fundamental than the particular procedures used in any given meeting. Namely, the nation-state-based structure of negotiations and agreements fundamentally limits how polycentric governance is in this context. Even if cities, states, regions, and corporations form their own agreements and pledges, the closed structure of this final stage of negotiations constrains how much those efforts are able to align. And as many have discussed in multiple contexts, resource differences among nation-states make a major difference in their ability to negotiate; the President has tried to be sensitive to small delegations who do not have enough people to attend simultaneous meetings on several streams, but it is clearly much easier for delegations that can substitute in negotiators as meetings go into the wee hours over multiple nights.

The solution to this problem is not straightforward. The world remains divided into nation-state units and treaties among nation-states remain the strongest mechanism that the world has to try to achieve universal action—a critically needed step given how large the gap is between the INDCs and the 1.5 (or even 2) degree goal. But after people emerge from this meeting, hopefully with as strong a Paris Outcome as possible, it is worth taking some time to consider what ways might exist to bring key actors on climate change together better as they make important decisions.