I’m back! But not foie gras

I haven’t been writing for almost a month, due to the bar exam (most of which I completely have forgotten by now, a mere week after the exam) and the visiting in-laws. They both suck my entire energy out of my brain, and its hard to say which is worse.

Anyhow, I don’t have many readers (if any at all) in any case but I want to let know myself and be proud that I kept keen ears for the hottest trade news.

First and foremost, there was the TPP; Mexico and Canada were finally invited officially at the Los Cabos G20 summit. There was also the Appellate Body’s half reaffirmation of the US-COOL measure, which both sides proclaimed a victory – a true win-win & pie-gets-bigger example of the globalization (I’m being sarcastic, of course…). And of course, who could have missed the US Supreme Court ruling on the universal health care, the “Obamacare”! It was quite a show – the Cheif Justice seemed determined not to play the partisan puppet and deliberately casted his vote, seemingly to the contrary to his own personal belief and judgement. But isn’t this playing politics and partisan game itself?

All these interesting developments while I was gone, but there is one issue that I warrant myself to comment – Foie Gras. Yes, that’s right, the recent Californian ban on foie gras is my topic of the day, topping the TPP or COOL or Obamacare.

Firstly, I had no idea what foie gras was. Of course, I knew it to be an expensive menu like Caviar, which involved inner parts, like liver, of the creatures that resemble ducks. What I didn’t know is that to make such livers large enough for foie gras, the breeders tube-feed these animals, above and beyond what they can eat, let alone what they want to eat.

Secondly, I was also surprised to find a trade issue in foie gras – it is reported that the French breeders are urging trade dispute remedies against California:


One more surprise why I was tempted to write on this topic – the arguments of the French breeders (opponents of the regulation) are symmetrical to the arguments of the environmentalists and health advocates (often proponents of more regulations), in a sense that they both aim at the substance of the law rather than the trade aspect.

If you ever read my prior posts, you know where I stand on the environmental issues and health related issues (tobacco issues to be specific). I am firm that substance of these issues must be beyond the reach of the trade tribunals like the WTO Panels and Appellate Body. I opined that this was not only for the maintenance of the integrity of the WTO as a trade regulating body, but also for environment and health issues, both of which deserve expert adjudications from specialized organizations. Substituting WTO dispute settlement body for lack of such institutions, in my humble opinion, seemed to invite more harm than benefits in the short-run; and inhibit further developments in the long-run.

Coincidentally, I found myself standing against the environmentalists and health advocates in many of the issues as I was asserting such a view. Often times the measures were poorly designed (if not disguised) towards achieving the stated purpose, yet suspiciously effective in distorting trade. Well, what a coincident that (almost) all the clove cigarettes are from Indonesia!? Or, how strange is it that “dolphin safe” tuna actually kills  as many dolphins as the Mexican tuna, which are prohibited from using such a label!?

In the mean time, I have to reiterate that I am not an anti-regulation right-wing supporter each time I oppose these measures. I believe that regulations are needed; and the question is “how” to regulate, not “whether” to regulate. Even the decision not to regulate, in my opinion, is a deliberate “regulation” itself – it is a conscious decision to omit, fully knowing the consequences and net benefits of such non-regulation. However when a particular measure is at issue before the WTO, the only question is whether such a measure, to the extent it relates to the trade, is in violation of the trade rules.

In a rare situation to reinforce my such commitment for trade-centric adjudication before the WTO DSB, foie gras presented itself. The foie gras prohibition opponents are those who support repeal of the regulation. They argue that the measure is unwarranted over regulation of the State over citizens’ dinner tables (not your average dinner table though). In the heart of their complaint is the fact that the ducks and geese have different physical construction than human, and they can withhold the tube feeding better than what our perception would like us to believe.

And of course, all these arguments are irrelevant to the contemplated dispute under the WTO rules. From the perspective of the GATT rules, one would have to find a discrimination in order to invoke Art. I or III (no other Articles seem relevant); to the knowledge of the author, discrimination is not an issue and the French breeders are quoted for admitting that their share of export to the California is negligible.

One may also look to the TBT Art. 2.2, the infamous “more trade restrictive than necessary” clause. It is likely that the future Counsels for the French breeders will find their treasure in this clause, but the defence already looks formidable – the stated objective is an enumerated objective (“animal… life or health”) and the jurisprudence is clear that the State is free to choose its own level of tolerance, including the complete prohibition, so long as the objective is legitimate.

As with my opposition against environmentalists and health advocates in WTO disputes regarding tuna, cigarettes or COOL, I am unconvinced of the foie gras breeders’ arguments directed at the substance of the law, not its trade impact. It may be that ducks and geese are more pain tolerant to tube feeding because they have more flexible esophagus. Even if it does, however, the WTO DSB forum is where trade issues are adjudicated, not a forum of settlement of ducks and geese’s biology.

For this reason, I am of the opinion that this California law should stand, at least under the WTO rules. For those French breeders who want to challenge the Californian law for its content, they must find a proper forum first, which doesn’t appear to be the WTO. Try Beverly Hills.

In the mean time, I too support otherwise lawful animal rights, althought I am not yet a FETA member.

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Take uncertainty into account – solar duties and economic criticism

Before I begin, apologies for some fat fingerring here. I am on my cardio machine with my tablet. Expect typos.

Here is a flavor of criticism on the recent US imposition of CVD and AD duties on the Chinese solar products:

Within the domain of law, this is a complicated issue dealing in particular with “double counting” which follows from the fact that China is treated as a non-market economy in both the CVD and AD investigation. There is no issue in settling these legal disputes in public.

However, there seems to be some serious mischaracterization of the issue at dispute here; as the above article clarifies, the criticism is overly pointed towards economic and substantive wisdom, spoken in terms of jobs gained or price of a job maintained and so on.

What these characterizations miss almost always is the fact that the AD and CVD investigations are not the proper forum for economic arguments (except, of course, to the extent provided by the statute, which itself is a legal, not a substantive matter). That debate belongs to the legislatures and to the citizens through our democratic process. And why should this be so? Well, to answer it would take a administrative/constitutional law professor, but basically it is because the “checks and balances” must be safeguarded – for the confidence of the public in government, as well as for proper governance itself.

That being said, I invite these economists to do a more thorough cost-benefit analysis. Inclde the costs to the society that would derive from uncertainty in law! For example, we could have a law, enacted for a good purpose, which only later in time turns out to be questionable. If the courts can simply judicially amend or repeal with no constraint, no one could know what law actually binds them at any given moment, since it might very well depend on which judge you get in the hearing date. Likewise, if the USDOC and ITC are left unconstrained and have been free to follow the wisdoms of the economists, companies will be lost in uncertainties, and may very well be forced to follow and lobby the economist-of-the-day.

And of course, all this can be quantified like the economists do with every pieces of human body in personal injury cases. And I mean no offence with this, because it is a value adding task that makes it an efficient resource spent. I am merely pointing out the fact that the same task can be done to put the cost for the legal uncertainty. Once we have that, now we have a fuller picture, which I presume would favor the USDOC and ITC’s continuing adherence to the statutory scheme of AD and CVD duties.

If you don’t like the law as it is, vote. Speak. Or even donate over the tax credit limit. But let the folks in the DOC and ITC do their job as written in their job descriptions.

By the way, there is no conflict of trade and environmental law. If there is, there are rules to settle them. Conflict means following one law which leads to the breach of another. None of the solar duties are illegal in any environmental law (if there is, I never heard one). What people perceive as conflict is, quite franckly, conflict of the reality and their own ideal.

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Tobacco exception proposed in the TPP

The US Trade Representative Ron Kirk has recently made a proposal to include a specific exception to the TPP free trade agreement. According to the source, the specific exception to the trade liberalization agenda would be in respect of tobacco control regulations. More specifically, the proposal purports to allow the future signatory States to implement regulations directed towards prevention of smoking:


The exception clause would “health authorities in TPP governments to adopt regulations that impose origin-neutral, science-based restrictions on specific tobacco products/classes in order to safeguard public health”.

In light of this proposal, I wonder if this could pass the threshold legal test provided by the GATT.

The WTO and GATT indeed recognizes the usefulness of the Regional Trade Agreements (RTA). The key word there is the “usefulness”, meaning that RTAs are not necessarily recognized as such. The usefulness is that the RTAs could facilitate further liberalization within the like-minded countries. RTAs that does not serve such a purpose should be, and are, disallowed.

This is exactly why the GATT Article XXIV:5(b) provides this:

“…with respect to a free-trade area…, the duties and other regulations… shall not be higher or more restrictive than the corresponding duties and the regulations of commerce existing in the same constituent territories prior to the formation of the free-trade area…”

Assuming that the proposal was made in a reaction to the recent Appellate Body decision against the US and its regulation prohibiting Clove cigarettes, the proposal is inherently inconsistent with the Art. XXIV, in that it attempts to allow what has been disallowed under the WTO rules.

Even if not, the WTO exceptions, notably the Art. XX, does not provide tobacco-regulation specific exemption. It simply provides a broad “health” related regulation exception. In this respect, there is a serious question whether a narrower and specific “tobacco” language could pass the “shall not be more trade restrictive” test. The same question should be asked about

For the benefit of a doubt, let us assume that the proposed specific exception is merely a clarification of the exception already provided by the GATT Article XX. In other words, the specific exception allows only what is already allowed by the Art. XX. If this is the case, one would have to wonder why such a clause is necessary in the first place, as the TPP apparently already includes a general exception clause akin to the GATT Art. XX.

More importantly, to my mind, such a proposal strengthens the TPP critiques, who believes that the agreement is nothing more than a US-led world trade policy manipulation scheme. It should be noted that there are others in the US who advocate the inclusion of anti-currency manipulation clause, which of course, cannot be thought of as directed at any States currently involved in the TPP (instead, read “China”).

Yet another reason why Doha enthusiasts (if there are any still) should made themselves a rum’n coke tonight. 

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A Korean appointed to the WTO Appellate Body

Cha Seung Wha, a professor of law at Seoul National University, has been appointed to a 4 year office with the WTO Appellate Body:

It is fascinating how much contribution this rather small countries (and my nation of birth as well) has made in the WTO. In almost all trade negotiations, especially since the Kennedy round, Korea has been a more than proportional contributor. Even discounting for the fact that Korea has been a major beneficiary of the more open trade regime, Korean contribution seems to be outstanding. For that, it is great to see a Korean national sitting in the Appellate Body.

I do not know Mr. Cha very much. I have seen that his lectures are available on the UN website, but I have not actually watched it. Time permitting, I will read his work and post updates. All I can hope at this moment for my personal prefernce is to see him adjudicate according to the law – the treaty text, – as opposed to the economic merits. Since I don’t know his approach, but I am (unjustifiably) afraid that Mr. Cha may take part in judicial legislation, given the long standing Korean position in zeroing (Korea opposes it, which appears to be authorized in the treaty).

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Investors of Argentina beware – you knew what this administration is made of before!

Everyone should be well aware of the current situation in Argentina:
For a summary, Argentina has just passed a legislation expropriating a Spanish energy company. At the same time, its import licensing regime – allegedly required for more than 800 types of products, taking longer than 30-60 days allowed by the WTO – has been under heavy fire in Geneva, by not only EU, but also… pretty much everyone else.
But firstly, realize that these two are separate issues from a legal point of view. The import licensing is a WTO matter, where proper remedy is available. Sure, they may be politically and economically parts of a single matter. However, the import licensing matter has a legal remedy, and Argentina should be allowed to stand firm on its possition until it is oroperly adjudicated. Before the Panel ruling, the criticism against Argentina is only and just that, a criticism.
Second, someone explain me what Argentina has done wrong in expropriating Repsol YPF (the expropriated Spanish company). I have been caught up in the bar exam prep, so was not able to do a thorough research. However, I haven’t heard a single BIT provision which could have been breached. Plus, the EU has already said that Argentina is not in breach of the GATS. So, what’s wrong in the expropriation? Repsol has all the right ti take this matter to the Argentinian domestic court, if it is worthwhile. Or otherwise, you just got busted on the risk that you took for investing in Argentina, knowingly (I would assume) in the absence of protection of a BIT.
Let’s be a bit blunt. Argentina has not been a model economy for investment. It has been manipulating statistics, and has had the record number of invetor-State disputes (from my vague memory long time ago – don’t count me for accuracy though…). Repsol has taken the risk of investing in this investor-unfriendly country, without the protection afforded by a BIT. Too bad, just don’t invest in Argentina, unless you have a good protection, people!

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Other: Movie review on “Quantum Activist” and “Pi”

I have recently watched two movies, which I thought were excellent. Not that I agreed with their themes or the messages, but I was pleased that some people are actually thinking about what really matters – where and why we are going as a society, – while the rest of the world is too busy sorting out the details of this big machinery called the society.

First movie is a documentary, called the “Quantum Activist“. Find it on the Youtube here:


The documentary follows a theory of a physicist, named Amit. According to his theory, consciousness is the ultimate creator of the reality – the God, if you will. You perceive “things” because you are conscious. And you perceive “things” as they are (ex: hot, cold, red, big…), also because your consciousness does so.

If I may translate, you exist because you are conscious. If you are a tree, it is as if you don’t exist, because you are not capable of recognizing your own existence. In the same vein, everything you “perceive” (see, feel, taste, smell, hear…) are the results of your consciousness.

However, according to his theory, the consciousness is not a local one. It is global, in a sense that there is only one consciousness. We, each one of us who believe that we are separate and independent individuals, are in fact only agents of this global consciousness. This is akin to the concept of the God, minus the beard. The global consciousness is why I can’t change the reality. It is constituted by the global consciousness, which I cannot alone control.

I disagree with the guru on his conclusion with a vigor. But his theoretical pretext is excellent. This is precisely why I love this documentary – it situate us for the utmost important question, and allows the viewers to discuss and debate this topic.

I agree with him on the simple fact that we are all connected at a certain level. After all, none of us (or things) are created out of the thin air. To be more accurate, nothing is created or thrown out in this universe. Matters and energies are simply recycled. For example, I am only big chunk of carbon, which is made up of materials endowed from my parents and what I have consumed after my birth. The things that I ate (beef, pork, pork, pork, and chicken) become my flesh and blood. In turn, these foods come from another source, and on and on.

There is nothing new here. Daoism or Buddhism practiced this belief for thousands of years. Here is where I start to diverge. Amit’s version of the universe is very human centric. After all, we only know human beings as the only organism capable of such a superior self-consciousness. In this vast universe, what we share together is rather small. To assume that there is the global “consciousness” which perceives the reality is to ignore all the non-conscious things. If the entire human race is eliminated tomorrow by a radiation or something (along with all other conscious organisms), does the reality collapse because the consciousness collapses? I say the mountains and the forests will survive. The universe doesn’t stop just because us, the human beings, stop.

If you follow Amit’s spiritual theory, then you would be tempted to say that everything is born out of the global consciousness, even the non-conscious things. It is as if nothing actually exist in reality. In this view, neither you nor I am real, and it is as if we are all just a component in someone else’s (the global consciousness) dream. Well, that is a possibility which I agree. But that’s only one possibility, which is not inevitable. In addition, we see the long history of universe without any human-like consciousness (concededly, which can also be argued as a construction of our consciousness).

In the same vein, similar problem is the nature of the “global consciousness” itself. In particular, how did it come about in the first place?

For both of these problems, my answer is that there is something other than consciousness behind the reality. Consciousness may very well be the ultimate source of “our” human reality. That is, what is good or bad, red or blue et cetera. These are essentially artificial concepts. Take “red” and “orange”. Do “red” and “orange” as different colours necessarily exist? What is the dividing line between the “red” and “orange”? Obviously answers are “no” and “there is none” respectively. We, the human society, artificially assigned something as “red” and  something else as “orange”. In some culture, there is no “orange”. It’s just “red”, but just a light one. So the “global consciousness” theory may be applicable for us, the human beings. To that end, the society should be idealistic, even if it is impossible. If we insist and believe in the ideal collectively, it will create reality. For example, the society has been insisting on freedom. As a result, the practice of slavery, which has been part of the human history since its birth until the 1950s, is now mostly a foregone history.

However, as I said, there is something bigger out there. That is, what is the reality of the universe, not just conscious human beings? To this end, I recommend you the movie “Pi”. It is directed by Darren Aronofsky, known these days for the movie “Black Swan”. In the movie, there is a genius mathematician, who likes to theorize that everything in this world is a numeric pattern. It is an extremely complex one. However, every events can be explained by mathematics. For example, the way I think, act, and react are all results of brain activity. This, in turn, is governed by the law of physics. Likewise, there isn’t a think in this universe that cannot be explained by mathematics.

With this theory in mind, the protagonist ventures to search for the ultimate mathematics that would explain the universe. If he finds it, this will explain everything, will predict everything and will leave no question in the working of the universe.

But you must think what this entails. It means that you have exhausted the purpose of your own existence. If you know how you will think, act, talk, do…etc, why do you live at all? If you know that the game will end 3:2, with the winning goal 40 minutes in to the second half, would you play that game? In a sense, you have out-performed what the universe is capable to handle.

In the movie, this is shown when the computer crashes time after time, when the protagonist asks it to compute for the ultimate “number” that explains the universe. In essence, the computer understands the world, but by doing so, transcends the reality. For example, if you have an online gaming character, imagine what it would be like if it “realizes” the software code that controls it.

As a result, the movie seems to suggest that the universe cannot be understood, without giving up our existence as well. I love this idea, because I understand the computer analogy. The law of physics and the universe has some resemblance to the computer programming. After all, these seems to be a logic and scientifically understandable reason behind everything in the universe. So, if the character in the software does something (thinks or acts) that generates a code that the software doesn’t understand (because it understood the code and transcended it), the software would stop in an error. The software cannot handle it any more.

I prefer not to subscribe to this grim view of the universe. The computer analogy is only one of the possibilities. To this end, the ultimate question that we ought to be asking, more urgent than any other question, is what the purpose of the human society is. For now, the survival is paramount. We need to survive, improve technology, accumulate lessons, and first understand this universe. To this extent, economic growth, sustainable development, poverty reduction and such issues are important.

However, we cannot forget that these goals, by themselves, cannot be the end in it self. For example, economic growth is not sufficient purpose. Simply put, what do we do once everyone becomes a 6-figure earners? What then is our purpose, once everyone in the world owns a BMW? Owning a Ferrari? As you can see, economic growth in itself has no value. It gets us no where.

Same goes with the poverty reduction. If it happens so that the human beings are actually antagonist in the universe, poverty, viewed from anti-human perspective, is a good thing (as we view certain other animals/insects, like rats and mosques).

That being said, the survival is firstly needed, because we need to buy some time, so that we understand this universe. The rests are in the hands of our offsprings – finding out what we “should” do, now that we understand “why”. In this regard, it is important that we don’t lose sight to the overall problem, the direction and the purpose. It appears that we are bogged down in the details – the economic growth, for example – too much.

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S. Korean Supreme Court skeptical about the US-Korea Investor-State Arbitration

According to a recently disclosed Supreme Court opinion, it is concerned about the Investor-State Dispute Settlement (ISD) provision contained in the US-Korea FTA (USKOR FTA):


I am personally not familiar with Korean experience with the ISD (if any at all.) However, the Korean Supreme Court brings up number of issues that I cannot agree with.

1. The concern number 1 is the “burden” on the Government of Korea (GOK). They seem to encompass both the burden in respect of resources (ex: time & money) and judicial burden (ex: the GOK judicial decisions being adjudicated by the ISD arbitrators).

The burden in respect of resources is real. The experience under the NAFTA Chapter 11 ISDs is telling. By early 2000s, the Canadian government had to go out and recruit an elite team of ISD lawyers from all over the world, now known as the JLT investment section. However, such a burden should not be considered in isolation. Alternatives to the ISD in resolving investment disputes must be assessed, and the ISD should be judged against these alternatives.

So, what alternatives are there to the ISDs? One is a State-to-State dispute settlement system, akin to the WTO system. From the investors’ perspective, this would entail two-step process. First, the home State must be pursuaded to bring the dispute. Second, that home State must arbitrate the dispute with the other State. As the WTO trade remedy regimes show, this alternative would not be any less burdensome than the ISDs. Likewise, in the absence of any other clearly less burdensome alternative, the burden created by the ISD should be acceptable, as long as the benefits outweigh the costs.

The Supreme Court’s argument based on the “judicial burden” is an acceptable concern. Whether or not a domestic judicial decision is subjected to a treat-based arbitration is a valid question. However, the question is no longer valid, now that the treaty has been negotiated, drafted, amended, thought-through, signed and ratified.

I am unfamiliar with the Korean constitution, but I imagine that it provides a room for international treaty obligations to operate within Korea. For example, Canada is a dualist country. As such, a treaty must be signed by the administration, but then has to be ratified by the relevant legislature(s). Once ratified, the treaty is now a domestic statute, with its force and effect. As such, the treaty interacts with the judicial branch in the same way a statute would (roughly speaking.)

Having adopted the USKOR FTA in “some” way (that I am not familiar with, to be honest), the infringement on the judicial decisions by the ISDs should not be objectionable. If this was not wanted, Korea should not have had signed such a treaty. If this was not valid under the Korean law (such as constitution), the treaty would not have been ratified. Having signed and ratified the treaty, the effect of the ISD over Korean judicial decisions is deemed to have been accepted as well.

2. The concern number 2 is the possibility of sovereignty infringement. This is a well-known criticism over the ISD, as demonstrated by the recent change of policy from Australia to exclude ISDs in its BITs. According to this criticism, investors may alter the course of national policies by putting the measure before the ISD arbitrations.

Such a criticism is completely unwarranted for a very simple reason: the ISD awards do not require the State to change its policies, which was determined to be in breach of the KORUS FTA (investment chapter.) The obligation of the breaching State is to compensate the investor in damages.

From a theoretical perspective, the compensation regime is firmly rooted in most domestic private law regimes. Simply stated, having solicited foreign investors on the basis of the protection given by the investment treaty, a breach of this quasi-contractual obligation should be compensated for the damages it caused. From the investor’s perspective, it might not have had invested in the first place, had there been no such protections. In this view, even the compensation is not objectionable. It is only a part of the bargain which the State voluntarily entered into.

3. The concern number 3 is the “reverse discrimination,” whereby foreign investors would have more rights than the domestic investors. This too has long been a popular myth in anti-investment circle.

Firstly, foreign investors are granted these rights by a treaty, which the States enter into on their own volition. To a certain extent, foreign investors have rights akin to a contract holder. This is not a discrimination known in law. Rather, it is a government honoring its own committment, with whomever it has done business with.

In addition, the treaty protections are a part of the bargain. The GOK provides these protections in the view of promoting more American investments.

On a more theoretical point of view, foreign investors are right to demand more protection than the domestic investors. For them (such as American investors,) foreign investment represents a risk. For example, American investors have no voice in the GOK’s policy making. The GOK is free to institute policies without an American investor being heard. This is the political risk at the heart of the investment treaties. In contrast, American investors in America have their voices in the policy making, through the process of democracy.

In conclusion, the concern over ISDs is hugely overstated. The NAFTA jurisprudence in fact shows a bias towards State discretion. Arbitrators have been quite deferential to the State as well. The concerns over sovereignty and reverse discrimination disregard the international character of the investment treaties. The “judicial burden” argument is a domestic issue which should have been addressed before the ratification. The resource burden argument has some merits, but the critic fails to show any alternative.

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