Trade in hydrocarbons, fissionable materials and cross-border transmission of electricity largely take place outside the multilateral trading system. Two key developments may now lead to convergence between the energy business and the rules of the WTO.
The United States has a long history of advancing the rules-based order and, as a practical matter, has never lost a dispute arising from one of its many investment agreements. But investor-state dispute settlement procedures may not have a future.
While President Trump believes China’s large trade surplus shifts the balance of power in a tariff war to the United States, China can respond by punishing U.S. affiliates, who are sitting ducks in a trade war.
With over 2,500 international investment agreements in force and only a total of 817 known investor-state dispute settlement arbitrations, it’s safe to say that the majority of these agreements have operated without a single dispute.
International investment agreements have been a remarkably successful policy innovation: today, there are over 3,000 of them in force worldwide.
Trade rules typically cover a category of goods or services and affect all firms engaged in trade. Investment disputes, on the other hand, are usually about a state’s treatment of an individual enterprise.
Every January, the global automobile industry gathers in the Motor City for the North American International Auto Show (NAIAS). In a celebration of ingenuity, companies display futuristic concept cars, present cutting-edge technologies, and promote their latest offerings.
We often talk about “trade wars,” but in the era of a rules-based trading system the phrase typically refers to the use of tariffs or import restrictions to inflict economic harm. It was not always so. Before the GATT and its design for the peaceful settlement of commercial disputes, the use of military power in international economics was commonplace. Take the case of the fight over control of nutmeg production in the 1660s.
Safeguards are designed to help domestic producers adjust to competition, but there at least four reasons they don’t help the American consumer. Two high profile petitions will test how the administration deals with these competing concerns.
A NAFTA negotiation could address the “microeconomic” factors that affect trade flows would increase the level of trade between the United States and Mexico and make U.S. consumers better off, but it wouldn’t have much effect on the balance of trade. On the other hand, economic growth in Mexico would achieve that effect by stimulating demand for more U.S. products.