The blurb in your program brochure asks,  Should the U.S. adopt a new procedure for implementing adverse World Trade Organization (WTO) decisions, possibly including an active role for U.S. courts

Magnus, John R.

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SHOULD THE RELATIONSHIP OF WTOOBLIGATIONS TO U.S. LAW BE REINVENTED?John R. Magnus*I. INTRODUCTION ........................................ 343II. RESPONDING TO ADVERSE WTO DECISIONS-THE CURRENT SITUATION ............................... 344III. WHAT ABOUT A CHANGE? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  346I. INTRODUCTIONThe blurb in your program brochure asks, "Should the U.S. adopt a newprocedure for implementing adverse World Trade Organization (WTO)decisions, possibly including an active role for U.S. courts?" In other words,should WTO dispute settlement decisions be given some sort of official statusin the U.S. legal system? The topic is a timely one. There is a debate nowgoing on and likely to intensify soon about Trade Promotion Authority(TPA)-a political arrangement designed to facilitate cooperation between thetwo political branches of the Federal Government with authority in the field ofinternational economic relations. But in order to lead anywhere reallyproductive, the debate should step back a few paces and look more broadly atour front-loaded system for achieving conformity with international obligationsundertaken in the trade field.What do I mean by a front-loaded approach? The basic idea is that weseek to make the changes necessary to implement new trade obligations all atonce, through an implementing bill enacted after a pact's signature and beforeits entry into force. Thereafter, we worry mainly about complying with U.S.* Mr. Magnus is President of TRADEWINS LLC and has been an active trade practitioner forseventeen years, serving as external counsel to domestic and foreign firms and industry coalitions in sectorssuch as steel, forest products, chemicals, microelectronics, aerospace, textiles/apparel, photographic materials,insurance, beverage alcohol, machine tools, telecommunications, motion pictures and cable television. Headvises and represents clients on multilateral negotiations and WTO disputes; on regional and bilateral tradeinitiatives; on U.S. trade legislation and Congressional oversight activities; on high-profile market accesscases involving goods and services; on foreign governments' trade regimes and industrial policy measures;and on customs and compliance issues. Since 2003, Mr. Magnus has been an Adjunct Professor of Law atthe University of Baltimore School of Law, teaching International Business Transactions and InternationalTrade Law and Policy. Mr. Magnus is admitted to practice before the U.S. Supreme Court, the U.S. Courtsof Appeals for the Federal Circuit and the D.C. Circuit, and the U.S. Court of International Trade, as well asin the District of Columbia, and the State of California. He holds a JD from the University of Chicago LawSchool (1990) and an AB, International Relations from Stanford University (1986).ILSA Journal of International & Comparative Lawlaw as revised, rather than focusing directly on international obligations. Thisis implicit in our TPA system-a system that aims to resolve a constitutionalconundrum-to enable us to participate as a credible partner in trade initiatives,and to assign an appropriate implementing role to all three branches ofgovernment. In the case of the judicial branch, the assigned role is basicallyzero. We maintain a membrane between our legal system and the internationalobligations, and we sideline judges by denying them any real role in policingthe government's conformity with international rules. They have to applydomestic law in the cases that come before them, even if they think thatdomestic law implements (transposes) international obligations incorrectly.This situation strikes many lawyers, especially those from other jurisdic-tions, as unsettling. And objectively speaking, the premise that we can do allof our implementing up-front is starting to look more and more like a conceit.According to one recent count published by the Office of the U.S. TradeRepresentative, there have been thirty three WTO dispute settlement casesagainst the United States that succeeded on core issues, with U.S. measuresfound to violate WTO obligations.1 The U.S. implementing legislation for theWTO agreements, known as the Uruguay Round Agreements Act (URAA), wasenacted in 1994 and took full effect along with the WTO agreementsthemselves on January 1, 1995. Even subtracting cases involving measures putin place after January 1, 1995, a few of which have been challenged at theWTO, thirty-three losses means there were a lot of errors in the URAA-mainly, a lot of measures we didn't think we needed to amend or repeal in1994, but were later told we did. Such adverse rulings are hard to swallow,since they reflect a stark difference of opinion (between the U.S. implementersand the WTO adjudicators) over what the United States really agreed to. Whentold that our implementers made dozens of serious errors, some of us suspectthat the problem may often lie with the adjudicators. The front-loadedapproach is also poorly-suited to ensuring conformity over time with certainkinds of obligations, such as the obligation not to harm trading partners throughsubsidization.II. RESPONDING TO ADVERSE WTO DECISIONS-THE CURRENT SITUATIONConcerning the U.S. response when presented with adverse WTO disputesettlement decisions, the situation at present is basically as follows:1. OFFICE OF THE U.S. TRADE REPRESENTATIVE, SNAPSHOT OF WTO CASES INVOLVING THE U.S.(2006), available at www.ustr.gov/assets/Trade Agreements/MonitoringEnforcement/DisputeSettlement/WTO/SectionIndex.html (follow "Snapshot of WTO Cases Involving the United States" hyperlink) (lastvisited Mar. 17, 2007).[Vol. 13:2Magnus1) The Executive Branch, speaking for the United States, alwayspromptly declares an intention to bring measures found WTOinconsistent into conformity, and normally requests a "reason-able period of time" in which to do so. The Executive Branchdoes not always have a clear sense of how the measures will berevised to achieve conformity, or a clear plan for securingCongressional approval where this is needed, but it alwaysannounces an intention to comply. There were rumors that theInternet Gambling case would break this pattern, and indeed itmight have if the Appellate Body had not modified the lowerpanel findings and produced a final decision that could beregarded as tolerable from a U.S. point of view.2) Where the changes needed are within the power of theExecutive Branch to deliver, they are always delivered andalmost always on-time.3) Where the changes needed require an Act of Congress, there aresometimes substantial delays, and a few adverse decisionsrequiring congressional action remain un-implemented to thisday (Examples: Havana Club, antidumping "all others" rate).Congressional action can be obtained, even when politicalresistance is strong, where meaningful retaliation by powerfultrading partners provides an added incentive (Examples:FSC/ETI, Byrd Amendment). But generally, the Administrationis more interested in achieving WTO conformity than theCongress is, and is asked to pay some sort of political price to"buy" congressional action. Legislation implementing adverseWTO decisions therefore is sometimes packaged with otherprovisions, desired by Congress, which the administrationwould not likely support in isolation. In one case (Irish Music),the United States "monetized" a WTO conformity problem,paying cash as a settlement to stem pressure from a victoriouscomplainant rather than altering a U.S. statute that would havebeen politically hard to change. In another case that wasoriginally thought to require congressional action (InternetGambling), the Administration cited changes in its internal"enforcement posture", which it said were adequate to achieveconformity with the adopted WTO decision. The complainant(Antigua) disagreed and requested compliance proceedings,which resulted in a finding that the United States has not yetachieved WTO-conformity in this matter.In sum, we have a fairly ponderous mechanism for acting in the wake ofan adverse WTO decision, and a pretty skeptical attitude toward the wholeendeavor. We certainly could, in theory, streamline things.2007]ILSA Journal of International & Comparative LawI1. WHAT ABOUT A CHANGE?So what are the best reasons for and against a change that would "piercethe membrane," give WTO obligations a higher status in the U.S. legal system,and (presumably) allow judges to get into the game of policing the govern-ment's behavior? Reasons for such a change include the following:1) The nature of WTO obligations is changing, and in a way thatwill put ever more pressure on our front-loaded implementingsystem. Increasingly, the WTO rules include not just negativeobligations ("I will refrain from doing X to interfere with tradeif you will refrain from doing Y to interfere with trade") butpositive obligations as well ("I will do X to facilitate trade ifyou will do Y to facilitate trade"). And they are becoming moreresults-oriented rather than process-oriented ("I will undertaketo provide a competitive internal market for basic tele-communications services"). What is needed to implement, andensure conformity over time, with obligations of this typecannot easily be determined during the brief window betweensignature and entry into force.2) Judges, based on the trend of their opinions citing the"Charming Betsy" doctrine, seem eager to get into this game,and many of them would be capable of interpreting the WTOagreements and judging government actions against thoseagreements' requirements in close cases.3) America's popularity in the world is at a low ebb in part becauseof the perception that we are not much interested in being boundby international rules. There is very little scope at present forchanging this perception in matters military (UN authorizationto use force; International Criminal Court), environmental(Kyoto), or labor-related (ILO Conventions). Perhaps in theeconomic sphere, where we are doing well and have a basis foracting confidently, we could make a greater allowance andeffect a change that would have not just practical but also broadsymbolic importance.Reasons against making such a major change include:1) In debates over trade, we have always had a certain amount oftrouble with the "black helicopter" crowd-those who arguethat trade pacts, especially when coupled with membership in aninstitution like the WTO, undermine our sovereignty. Up tonow, the WTO's defenders have always been able to prevail inthat argument, by pointing out that the WTO cannot directlychange U.S. legal and policy outcomes. We can be found in[Vol. 13:2Magnusbreach of WTO rules, but the decision about what to do in thatscenario is a political one. Without that layer of politicalreview, those dissenting on sovereignty grounds would have amuch more legitimate (and strongly felt) objection. Indeed, forall its "voluntary" aspects, WTO dispute settlement is alreadyconsidered one of the most binding and effective forms ofinternational dispute settlement.2) The WTO rules have edged (some would say sprawled) into anumber of areas that are sensitive, and in which a furthertransfer of sovereignty would be troublesome. Included-tocite just four that have caused problems for the United Statesalready-are such matters as gambling regulation, productstandards, government spending programs, and tax policy, aswell as various areas of service sector regulation traditionallydominated by state and local authorities in the United Statesrather than the federal government. Digesting this broader setof obligations, not to mention finding consensus for still greaterexpansions of the WTO's remit (now under discussion), will beeasier if we maintain political control in the dispute settlementcontext.3) The WTO dispute settlement process has produced a substantialnumber of dubious pro-complainant decisions. Complainantsalmost always succeed at least on large portions of their cases,and there is a structural concern in that the decision-makers (andthe Secretariat officials who staff them) as individuals aredeeply invested in the WTO and want it to have the widestfootprint possible; they are generally willing to strain to find aWTO rule that applies to conduct they find distasteful. Givingthe output of such a system, an official status in U.S. law wouldbe controversial, and rightly so.4) Getting judges into the business of policing the government'scompliance with international rules would present difficultchallenges in our constitutional system. There are significantforeign policy implications that cut in favor of a mainlypolitical, rather than legal, approach here. Indeed, there is abroader principle in U.S. law, not limited to the trade field,under which the task of determining what the internationalobligations of the United States are rests in the first instance withthe Executive Branch. Allowing lawsuits against the governmentto challenge assertedly WTO-inconsistent behavior would putjudges in the position of second-guessing--or possibly evenjumping ahead of-Executive Branch determinations.I come down on the side of continuing to deny WTO dispute settlementdecisions formal recognition in U.S. law. It might make sense to temper the2007]348 ILSA Journal of International & Comparative Law [Vol. 13:2extreme "frontloadedness" of our TPA implementing system, and there may bedifferent ways to structure the political review that occurs in the wake of anadverse WTO decision, but some layer of political review remains essential.This fundamental aspect of the current U.S. approach would be too difficult andrisky to change.But others will no doubt weigh the factors listed above differently, orfocus on other factors altogether, and reach a different conclusion. I hope thedebate is a vigorous one both during our Q&A this morning and in the forth-coming discussions over renewing TPA. I thank you for your attention andlook forward to your comments and questions.

Should The Relationship Of WTO Obligations To U.S. Law Be Reinvented?

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Should The Relationship Of WTO Obligations To U.S. Law Be Reinvented?

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