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Virginia Lawyer                    The Official Publication of the
                                   Virginia State Bar




Perspectives
The legal dimensions of the
global Trade landscape




Bar News:
Thomas A. Edmonds Retires
and Karen A. Gould Named
Executive Director




www.vsb.org
                                                                                                                             December Feature




                             Global Trade Law
Global trade has grown immensely since the end of the Second World War. Globalization accelerated expo-
nentially after the fall of the Berlin Wall and after the dissolution of the Soviet Union.

The World Trade Organization was founded in the midst of these momentous changes. Its principal objec-
tive was to develop a rules-based international system of trade. Shortly after the formation of the WTO, new
and powerful players emerged in the global trading system, which gave rise to economic and political anxi-
ety within the United States and worldwide. After 9/11 this anxiety was heightened when countries such as
Russia, China, India, Brazil, and the United Arab Emirates exploded onto the global stage with their great eco-
nomic booms, supercharged with trade surpluses, petrodollars, and surging commodity prices. Managing this
new order has become a central problem of global politics.

The International Practice Section presents feature articles in this issue of Virginia Lawyer to explore legal
dimensions of this new global landscape.

Two articles examine the World Trade Organization by assessing U.S. trade litigation against China and reflect-
ing upon the current stalemate of WTO trade negotiations. Other articles appraise the trade policies of
Virginia and Gov. Timothy M. Kaine’s vision of “embracing globalization.” Another article assesses the chal-
lenge that bilateral agreements pose to the multilateral system. Finally, two shorter pieces provide research
assistance to professionals examining international trade law and undertakings by major universities aimed at
commercializing research and promoting technology transfer to the private sector.

Global trade cuts across sectors and disciplines. Contributors are from George Mason University’s schools of
public policy and information technology, the Virginia Association of Law Libraries, the Department of Trade
and Economic Development in the Office of the Virginia Governor, and the U.S. International Trade
Commission in Washington, D.C.




                                                                     Stuart S. Malawer is distinguished professor of
                                                                     law and international trade at George Mason
                                                                     University. He is also a visiting professor at St.
                                                                     Peter’s College, Oxford University. A former chair
                                                                     of the International Practice Section of the Virginia
                                                                     State Bar, Malawer is special editor of the articles
                                                                     sponsored by the International Practice Section
                                                                     featured in this issue of Virginia Lawyer. He is the
                                                                     author of WTO Law, Litigation & Policy (2007),
                                                                     published by William S. Hein & Co. He was a mem-
                                                                     ber of former Gov. Mark R. Warner’s trade mission
                                                                     to China. His Web site is
                                                                     www.InternationalTradeRelations.com. His e-mail
                                                                     is StuartMalawer@msn.com.




    The authors of these articles on law and trade welcome your comments: ASood@gmu.edu; Jeseku@wm.edu; KFandl@yahoo.com;
                    Patrick.Gottschalk@governor.virginia.gov; Robert. Rogowsky@usitc.gov; StuartMalawer@msn.com




                            I   N T E R N AT I O N A L        P   R A C T I C E       S   E C T I O N      |     Virginia Lawyer           27
International Practice Section



       United States-China Trade Litigation
                   in the WTO
                                          by Stuart S. Malawer



                                    The Permanent Mission of the People’s Republic of China
                                              to the World Trade Organization




                                                                                            WTO Litigation
                                 T    he two most intriguing aspects of
                                      today’s global trading system are the
                                 convergence of the role of the World
                                                                               Since the midterm elections, the United
                                                                               States has launched an assault on China
                                 Trade Organization (WTO) litigation and       using WTO litigation. In 2007, the United
                                 United States-China bilateral trade rela-     States filed three cases in the WTO
                                 tions.1 The U.S. has made WTO litigation      against China.
                                 a major component of its trade policy of
                                 “active engagement” to meet the new           The first case, filed on February 2, 2007,
                                 challenges of East Asia.2 A response to the   targeted a range of export subsidies.
                                 historic change of control within the         (Exemption from Taxes as to Domestically
                                 Congress at the 2006 mid-term elections,      Produced Goods) 3 The U.S. contends that
                                 the policy has become a central aspect of     China is violating the Subsidies Agreement
                                 U.S.-China trade policy.                      and National Treatment Principle.
                                                                               Specifically, the U.S. argues that China
                                 The U.S. government has initiated a trade     provides various tax rebates to a range
                                 offensive against China in the WTO,           of Chinese firms amounting to export
                                                                               subsidies.4 Mexico filed a similar case
Since the midterm                mainly in response to the shift of congres-
                                 sional control from the Republican Party      and a panel was established in
                                 to the Democratic Party. This offensive has   September 2007.5 The U.S. case was
elections, the United            serious implications beyond the bilateral     suspended in November after the parties
                                 trade issues concerning the U.S. and          reached a settlement.
                                 China. It foreshadows the governance of
States has launched              global trade moving from negotiations         On April 10, 2007, the United States filed
                                 toward more litigation.                       twin cases.6 The first of these cases
                                                                               involved an alleged failure to enforce
an assault on China              This change and its effects raise two         intellectual property rights. (Protection &
                                 broader questions. First, what are the        Enforcement of Intellectual Property
using WTO litigation.            implications of this U.S. trade offensive     Rights) 7 The U.S. alleges that China is vio-
                                 against China for global trade relations?     lating the Intellectual Property Agreement
                                 Second, is resorting to WTO litigation a      (Trade-Related Aspects of Intellectual
                                 default position because of the failure of    Property Rights, or TRIPS) by not enforc-
                                 international negotiations?                   ing its intellectual property obligations.
                                                                               For example, the U.S. argued that the
                                 My approach is to focus primarily on          threshold to establish trademark counter-
                                 recent WTO litigation involving the U.S.      feiting and copyright piracy under China’s
                                 and China while noting recent interna-        criminal procedures is too high. Moreover,
                                 tional negotiations and pending               the U.S. argues there is a lack of proce-
                                 Congressional legislation.                    dures and penalties. A panel to determine



28            December 2007
                                                                                                       International Practice Section

this matter was established in September            the value added tax to Chinese manufac-         China has consistently argued that the
2007.                                               turers (or when Chinese designed chips          cases filed by the U.S. on these issues
                                                    were imported) violated the GATT. The           were unjustified. “U.S. filing complaints in
The second of these cases targeted market           second case, filed on March 30, 2006,           the WTO over alleged commercial piracy
access and distribution restrictions on             (Imports of Auto Parts)11 had the U.S. and      in China will badly damage coopera-
films and audiovisual products. (Trading            the European Union arguing that the             tion.” 18 In the U.S. Court of International
Rights and Distribution Services for                import of auto parts are subject to tariffs     Trade case, China has taken an even
Certain Publications and Audiovisual                equal to those on completed cars.12 They        stronger position. “The Chinese govern-
Entertainment Products) 8 The U.S. argues           argued that they should be charged the          ment expresses strong dissatisfaction
that China maintains restrictions on the            lower rate for parts, rather than the higher    about the U.S. decision to impose penalty
import of films and restricts foreign com-          rate, for completed automobiles and that        tariffs against the imports of Chinese
panies from distributing films and DVDs.            failure to classify the parts properly vio-     coated free sheet paper.” 19
The U.S. contends these restrictions violate        lates the GATT and the Trade-Related
market access obligations under the 1994            Investment Measures Agreement. A panel          Ambassador Susan C. Schwab, the U.S.
General Agreement on Tariffs and Trade              has been requested.13                           trade representative, says bringing trade
(GATT) as to imports, as well as the                                                                actions should not be viewed as a failure
Services Agreement concerning domestic              While not currently involving WTO               in trade relations. “We have brought four
distribution. A panel was requested in              litigation, a U.S. Court of International       formal WTO cases in the past fourteen
October 2007.                                       Trade decision of 2007 (High-Gloss              months and we are determined to press
                                                    Paper/NewPage Corporation) further com-         our cases vigorously in the months ahead.
Neither of these cases had third parties            plicates the trade disputes between China       This should not be regarded as a failure in
joining the U.S. Apparently, no foreign             and the United States. China has recently       our trade relationship with China. Quite
governments wanted to be associated with            threatened to bring full litigation against     the contrary. Resorting to dispute settle-
either the merits of the cases or their tim-        the U.S. in the WTO concerning subsidies        ment is itself a form of engagement. It is
ing, given their foreign policy or other            levied pursuant to this case.14 This case       evidence of two countries working to
global trade considerations.                        marks the first by China as a sole com-         resolve disputes about obligations through
                                                    plainant.15 Consultations were requested        neutral, legal mechanisms. WTO dispute
Prior to the 2007 WTO litigation, the U.S.          in September.16 On March 29, 2007, the          settlement is designed to prevent trade
filed two WTO cases against China. The              U.S. Court of International Trade in New        wars rather than fuel them.” 20
earlier filings indicate that the U.S. began        York upheld the George W. Bush adminis-
choosing WTO litigation against China as            tration’s (Department of Commerce)                      International Negotiations
an important trade tool several years prior         change of trade policy, bringing subsidy        The reliance of the U.S. on WTO litigation
to its most recent actions.                         actions against Chinese imports.17 The          points to faulty international negotia-
                                                    administration decided as a matter of pol-      tions.21 In May 2007, the Second China
The first case, filed on March 18, 2004,            icy to allow subsidy actions concerning         Strategic Dialogue in Washington, D.C.,
(VAT & Integrated Circuits),9 was settled in        goods from non-market economies. This           the more recent negotiations in Beijing
the consultation stage by a “mutually               ruling reversed the 1980’s Georgetown           and the Group of Seven (G-7) meeting
agreed-upon solution” prior to full litiga-         Steel and U.S. trade policy of the last         (even though it stepped up pressure on
tion.10 The U.S. contended that China was           twenty years, both of which did not allow       China in currency valuation) failed to pro-
violating the National Treatment Principle          bringing subsidy cases involving nonmar-        duce any significant results.22 Neither has
of the GATT, and argued that the refund of          ket economies, principally China.               the older U.S.-China Joint Commission on



                                                    China Litigation in the WTO (2003– 07)

   Complainant                            Party                  Status                            Number            Agreement
   U.S. Steel Safeguards                  T.P. Complainant       AB Report 2003                    DS 252            Safeguards
   U.S. A/D & CVD                         Complainant            Request Consultation 2007         DS 368            Dumping & Subsidies

   Respondent
   China’s VAT on Integrated Circuits     Respondent             Mutually Agreed Solution 2005     DS 309            GATT 1994
   China Auto Parts                       Respondent             Request Consultation 2006         DS 340            GATT 1994, Subsidies
   China’s Subsidies & Refunds            Respondent             Request Consultation 2007         DS 358            Subsidies
   China’s Intellectual Property Rights   Respondent             Request Consultation 2007         DS 362            Intellectual Property
   China’s Distribution System            Respondent             Request Consultation 2007         DS 363            Services




                                                                                                                Virginia Lawyer              29
International Practice Section

Commerce and Trade produced any                under this bill indicates that passing         the WTO, filing an additional three cases.
important outcomes.23 This failure of          legislation is not necessarily the most        Panels have been established and deci-
negotiations is occurring while China          efficient or effective way to address          sions are expected by late 2008.
remains the target of the largest number of    these trade issues. Reinvigorated negoti-
antidumping actions brought by countries       ations become more attractive, with a          The Bush administration’s newer trade
worldwide (thirty-six during July to           promise of a quicker resolution.               policy is in response to the swing in
December 2006).24 The EU is considering                                                       power in the Congress.33 The Democrat-
filing newer cases and adopting a more         The earlier Senate bill (sponsored by          controlled Congress has become more
aggressive approach.25 European steel          Schumer and Graham) would authorize            resistant to President Bush’s trade policies,
makers recently asked the European             27.5 percent duties on all imports to          which have involved opposition to fast-
Commission to impose antidumping duties        counter the undervaluation of the yuan.        track extension and the approval of vari-
on steel, and this appears to be an open-      This bill also presents a novel possibility—   ous bilateral trade agreements (with South
ing shot in a looming trade war with           action in the WTO. The bill declares that      Korea, Panama, Peru, and Colombia). The
China.                                         as a general principle the undervaluation      Bush administration’s approach is an obvi-
                                               of currencies amount to an export subsidy.     ous response to the Democratic Party’s
       Congressional Legislation                                                              focus on a “new populism,” emphasizing
While the Bush administration is moving        The Senate Banking Committee bill              “trade and jobs.”34 This shift joins a grow-
forward with its trade litigation, there are   (sponsored by Christopher J. Dodd and          ing popular resistance to globalization and
various bills in Congress proposing a host     Richard C. Shelby) requests the Treasury       trade, growing concern over product and
of stronger actions against China. Each        Department to take actions over global         food safety, and increasing Republican
could have potentially serious conse-          currency imbalances and currency manip-        Party resistance, as well. Congressional
quences for trade with China. Describing       ulation. This measure is clearly aimed         backlash is in large part based on contin-
them is like photographing the sand on a       at China.                                      uous failure by the Treasury Department
beach during a windstorm.26 However,                                                          to determine that China has manipulated
what is particularly unique is that congres-   A bill in the House of Representatives         the yuan and declare such manipulation to
sional legislation for the first time would    (sponsored by Arthur G. Davis and Philip       be a prohibited trade restriction.
include WTO litigation as a sanction.          English) would allow subsidy actions as
                                               to nonmarket economies. It would               The Treasury Department failed to take
The Senate Finance Committee bill (spon-       codify both the Bush administration’s          this action again in its semi-annual report
sored by Max S. Baucus, Charles E.             policy and the decision of the U.S. Court      to Congress on foreign exchange, issued
“Chuck” Grassley, Charles E. Schumer and       of International Trade in the High-            in June 2007. However, the Treasury
Lindsey O. Graham) defines dumping by          Gloss Paper authorizing subsidy actions        Department’s cautionary position is under-
considering undervaluation of foreign          against imports coming from nonmar-            standable. The provisions of the WTO
currency.27 This approach is tamer than        ket economies.                                 agreements do not consider currency val-
earlier bills. However, this bill would                                                       uation in the context of a trade restriction,
require the United States Trade                The Bush administration has warned             let alone declare them as inconsistent with
Representative (USTR) to file a WTO            against all of the above legislation.31 It     the WTO.35
action within a year of the Department of      emphasizes China as a source of afford-
the Treasury determining that a nation’s       able consumer products and a market-           The Bush administration’s policy also is a
currency is “misaligned.” Leading              place for American exports. In particular,     reaction to international diplomacy fail-
Democratic presidential contenders             the administration has supported negoti-       ures. Bilateral negotiations with China and
(Hillary Clinton and Barack Obama) have        ations with litigation as a central compo-     the Doha trade negotiations have been
signed on to this approach.28 The Bush         nent of its trade policy. Recently, the        disappointments. Successful bilateral trade
administration opposes this strategy.29        Bush administration denied a Section 301       talks hold the promise of resolving difficult
“Public opinion polls show rising discon-      petition seeking to launch a WTO case          disputes. Success in multilateral negotia-
tent with globalization among Republicans      against China concerning the valuation         tions offers the possibility of adoption of
and Democrats alike.” 30                       of the yuan.32                                 newer rules for the general trading system.
                                                                                              Developing and clarifying rules through
Given the time it will take for enactment                     Assessment                      multilateral negotiation is the optimal solu-
of the legislation, required Treasury          In summary, the U.S. filed two cases           tion. U.S. trade efforts should be focused
Department action, the USTR request to         against China in the WTO soon after            on this approach.
the WTO, and the WTO’s process of              China’s accession in 2001. Since the
panels and appeals, late 2010 is the ear-      midterm elections in 2006, the Bush            Of course, this newer U.S. trade policy is
liest any WTO action could occur. This         administration has launched a more             in the context of myriad international eco-
lengthy timeline for possible action           aggressive trade policy against China in       nomic and political factors. China’s eco-



30                 December 2007
                                                                                                          International Practice Section

                                                strength —poses obvious foreign policy                 within the WTO system? 47 The answer is
         China Investment Data                  dilemmas for the west.” 40 The ideological             yes. The possible implications of this
                                                battles over which model is best for                   reality are huge. Litigated decisions are
          Foreign Direct Investment
        Outflow — 2006     $11.3 billion
                                                economic development will continue.                    applicable only to the individual parties to
        Outflow — 1996     $2.1 billion         “Authoritarian nationalism” is challenging             a case. While litigation does hold the
                                                the Western political model that embraces              promise of coaxing states back to the
          Direct Investment Positions
                                                liberal democracy.41 “State capitalism”                negotiating table litigation simply does
        Inward — 2005      $610.2 billion
        Outward — 2005 $64.5 billion            seems more appropriate for defining the                not hold the answer for developing
                                                market in China.42                                     general rules addressing ever more com-
   International Direct Investment Database,
   Organisation for Economic Co-operation and
                                                                                                       plex issues of trade relations—rules that
   Development, Paris, 2006                     The new U.S. trade actions against China               are applicable to all WTO members. Is it
                                                in the WTO could easily spill into a larger            better for global trade relations to be cen-
                                                trade war.43 Initially, it could lead to new           tered on the WTO Dispute Settlement
nomic development and growth is huge.           Chinese restrictions on U.S. multinationals            Understanding system than on the seem-
China’s gross domestic product in the first     investing in China and China’s investment              ingly never-ending Doha negotiations or
quarter was a twelve-year high at 11.9 per-     in the U.S.44 The U.S. multinationals doing            bilateral negotiations over trade disputes?
cent. China could well grow this year at        business in China and U.S. exporters to                Here, the answer is no. Trade disputes are
the fastest rate since 1993 and bring it        China would pay the price for U.S. import              better settled within the dispute resolution
closer to overtaking Germany as the             restrictions.45 This possibility is particularly       system. While individual or a range of
world’s third-largest economy.36 China has      worrisome since China is generating                    trade disputes may be settled by bilateral
an overvalued currency, and global eco-         significant earnings in a generally slowing            negotiations, it is crucial for trade relations
nomic balances persist. The U.S. economy        U.S. economy. The U.S. economy is                      to be grounded in multilateral negotiations
is slowing. China’s demand for imports is       “decoupling” from the global economy as                through which policy choices are made by
fueling a global economic expansion.            the economic locomotive of global                      the parties for the benefit of themselves
China is on course to lead the world in ini-    growth. “[T]he global economy is moving                and the global trading system. Professor
tial public offerings.37 The initial public     into a newer era in which growth in devel-             Robert Z. Lawrence of Harvard University
offering of the Industrial and Commercial       oping parts of the world becomes the key               states, “The shift from bilateral to multilat-
Bank of China in July 2007 made ICBC the        component of economic expansion.” 46                   eral enforcement helps secure the legiti-
world’s largest bank by capitalization. Two                                                            macy of the trading system and reduces
months later, this IPO was surpassed by         Ultimately, the trade conflict could affect            the political costs associated with bilateral
that of China Construction Bank Corp.           the U.S. political and national security rela-         dispute settlement.” 48 He concludes,
China’s stock market has reached an all-        tions with China. Changing some specific               “There are other reasons to be wary of an
time high (six thousand in October 2007).       practices of China or tweaking U.S. trade              aggressive move toward tougher enforce-
In November, after its public offering,         law are not going to change the fact that              ment . . . [The] dispute settlement system
PetroChina became the world’s first             China is a rapidly developing, emerging-               reflects a subtle amalgam of the legal and
$1,000bn company. A day later, the pub-         market powerhouse. China is poised to                  diplomatic approaches . . .” 49
lic offering of Alibaba.com made it the         become the largest trading nation in the
world’s second largest Internet company.        world. There is a need to develop other                This grounding means reinvigorating the
China now leads the world in publicly           remedies for the U.S.-China trade conflict.            current round of WTO negotiations to
traded companies with more than $200            Developing less unilateral and confronta-              develop newer rules for both broader and
billion in market capitalization.38 China’s     tional actions on both sides is preferable.            more technical trade issues. As trade
sovereign wealth fund, the China                                                                       relations continue to evolve, these issues
Investment Corporation, is preparing to         The bigger issue still warrants discussion.            will undoubtedly encompass a greater
invest globally.39                              Has WTO litigation become the weapon                   range of economic relations than does the
                                                of choice for the United States because
Within a geopolitical context, China is         there has been a failure of diplomacy                               Trade Litigation continued on page 56
becoming of great importance and
concern to the United States. For exam-
ple, there has been increased coopera-                Official China Web Sites For Foreign Affairs & Foreign Commerce
tion between Russia and China in
Central Asia within the new Shanghai               Chinese Mission to the World Trade Organization     http://wto2.mofcom.gov.cn/aboutus/aboutus.html
Cooperation Organization. China has                China Ministry of Foreign Commerce (MOFCOM)         http://english.mofcom.gov.cn/
                                                   China’s Foreign Market Access Report (MOFCOM)       http://gpj.mofcom.gov.cn/table/2005en.pdf
been a key participant in the nuclear
                                                   China Ministry of Foreign Affairs                   http://www.fmprc.gov.cn/eng/
negotiations with North Korea. “[C]hinese
                                                   China Embassy to the U.S. (Economic & Commercial)   http://us2.mofcom.gov.cn/index.shtml
nationalism backed by economic



                                                                                                                    Virginia Lawyer                     31
International Practice Section



                   Virginia Embracing Globalization
                                                                        by Patrick O. Gottschalk




From left to right: Brent D. Sheffler of the Virginia Economic Development Partnership, Virginia Secretary of Commerce and Trade Patrick O. Gottschalk, Gov. Timothy M. Kaine, and
Virginia Deputy Secretary of Commerce and Trade Rick Siger on a 2006 trade mission to Canada.

                                                                                                                          There are many questions regarding both
                                                             I n his Economic Development Strategic
                                                                Plan, Gov. Timothy M. Kaine set forth
                                                             nine broad goals that focus on strength-
                                                                                                                          the short- and long-term implications of
                                                                                                                          globalization, but there is no question that
                                                             ening and maintaining Virginia’s award-                      globalization is upon us. The world’s econ-
                                                             winning business climate, while                              omy continues to expand. In a recent
Increased international                                      expanding opportunities for all of                           study, the International Monetary Fund
                                                                                                                          projected that the global economy will
                                                             Virginia’s regions and citizens. In keeping
                                                             with Virginia’s history of international                     grow by 4.8 percent in 2008, while the U.S.
trade by U.S. companies                                      commerce, the Governor’s Economic                            economy will grow by only 1.9 percent.
                                                             Development Strategic Plan contains a
                                                             goal directly related to international busi-                 Increased international trade by U.S.
has helped maintain                                          ness. This goal is to “develop a coordi-                     companies has helped maintain the
                                                             nated international marketing strategy for                   strength of the U.S. economy. The growth
the strength of the U.S.                                     Virginia including both foreign direct                       of the world’s economy, combined with
                                                                                                                          advances in technology and transporta-
                                                             investment and export/import features.”
                                                                                                                          tion, has produced a global business cli-
economy.                                                     The position of Governor Kaine’s adminis-                    mate that was unimaginable fifty years
                                                             tration regarding globalization is clear—                    ago. Over the past several decades,
                                                             Virginia is better positioned than many                      Virginia, like the United States as a whole,
                                                             other states to be a winner in a global                      has benefited from the increase in global
                                                             economy. Targeted international invest-                      trade. Since 1950, the volume of world
                                                             ments, increased exports, dependable                         trade has increased twenty-fold from $320
                                                             transportation, and strong governmental                      billion to $6.8 trillion.
                                                             leadership have all contributed to placing
                                                             Virginia in a position to prosper from                       Virginia is already a winner in globaliza-
                                                             globalization.                                               tion. There are more than seven hundred


32                      December 2007
                                                                                                      International Practice Section

foreign-affiliated firms located in Virginia.     of foreign employment in the U.S., or            Volkswagen of America Inc. — In
Virginia’s total exports of goods and ser-        approximately 144,800 jobs. The top coun-        September 2007, Virginia welcomed
vices are estimated to be $21 billion             tries for foreign employment are Germany,        Volkswagen of America Inc. as it relocated
worldwide. The Port of Virginia is the third      the United Kingdom, Japan, Canada, and           its U.S. corporate headquarters to Fairfax
largest on the East Coast, and earlier this       Sweden. The average compensation per             County. Volkswagen will invest more than
year Governor Kaine launched the Virginia         employee was nearly $60,000 for U.S. sub-        $100 million in a 185,000-square-foot facil-
International Trade Alliance, a public-           sidiaries of foreign companies, higher than      ity to serve as the headquarters for both
private partnership aimed at leading              the national average annual pay as calcu-        Volkswagen and Audi. This project will
Virginia’s international business strategy.       lated by the U.S. Bureau of Labor Statistics.    create four hundred new jobs paying an
                                                                                                   average wage in excess of $120,000.
There are challenges that come with the               Foreign Companies in Virginia
benefits of globalization. Virginia has lost      Some of the successes of foreign busi-           “Virginia’s work force and business culture
jobs in certain manufacturing industries.         nesses in Virginia speak volumes to the           are in line with our strategy of connecting
While the loss of any job in Virginia is a con-   importance of foreign investment to the           even more closely with our customers,
cern, the reality is that the net impact of       commonwealth.                                     and its location is convenient to vitally
trade on the number of manufacturing jobs                                                           important markets for all of our brands.
in the United States is positive. All fifty       Maersk —In September 2007, the Danish             We are excited to become part of the
states, including Virginia, have realized a net   shipping line Maersk and its sister com-          Virginia community,” Stefan Jacoby, CEO
gain in jobs directly attributable to trade.      pany APM Terminals opened a $450 mil-             of Volkswagen of America, said in the
                                                  lion new container terminal in Portsmouth         September announcement.
              Virginia Attracts                   that will employ 210 people. This facility is
         International Investment                 the first privately developed container ter-     Virginia’s foreign company activity has
One benefit of globalization is the foreign       minal in the U.S. Maersk’s current facility is   been on an upward trend since 1994, and
dollars it brings to the commonwealth             adjacent to the Port of Virginia. The prox-      I am confident this trend will continue.
through investment. Foreign investment            imity provides the state an opportunity to       Based on the Virginia Economic
has long been a priority for Virginia. In         improve capacity at its port operations.         Development Partnership’s (VEDP) cur-
1968, Virginia became one of the first                                                             rent pipeline of projects, foreign invest-
states to set up an overseas investment                                                            ment should continue to play an important
                                                  “This facility will create opportunities in
presence in Europe when it opened an                                                               role in Virginia’s economic growth. The
                                                   global commerce for our customers while
office in Brussels, Belgium. Successful for-                                                       VEDP is currently pursuing projects with
                                                   maintaining the highest standards in safety
eign companies in Virginia not only rein-                                                          major multinational companies in the
                                                   and security. Our vision is to create a port
                                                                                                   medical equipment, energy, metal build-
vest in their operations here, but also            that will act as a catalyst for international
                                                                                                   ing materials, food products, and automo-
become examples to other companies in              business in the local and regional
                                                                                                   tive industries.
their home countries and in their indus-           economies by creating a new, broader
tries. Their success makes it easier to            long term platform for business growth,”
                                                                                                     Virginia’s Products and Services Are
attract similar companies to Virginia.             said Thomas Thune Andersen, president
                                                                                                                   World-Class
                                                   and chief executive officer of Maersk Inc.
                                                                                                   Virginia products and services are found
Foreign investment in Virginia totals $19.6
                                                                                                   around the world, and the demand for
billion—just 1.6 percent of all foreign           IKEA— In October 2006, Swedwood
                                                                                                   Virginia products and services continues to
investment in the U.S. Leading countries          North America, a furniture manufacturer
                                                                                                   grow. The commonwealth has incredible
for Virginia foreign investment are               and subsidiary of IKEA, announced that it
                                                                                                   assets that support Virginia companies as
Germany, Japan, the United Kingdom,               would build its North American manufac-
                                                                                                   they expand their international business.
Denmark, and Canada. Industry sectors in          turing operation in an industrial park           The twenty-fourth largest exporting state
Virginia with high levels of foreign direct       jointly developed by Pittsylvania County         in the U.S., Virginia has seen exports
investment are information technology,            and the City of Danville. With a projected       steadily rise over the years. In fact, Virginia
transportation equipment, electronics,            completion date on the first of three            saw a more than 15 percent growth in
plastics, rubber, and machinery manufac-          phases slated for the end of 2007, the           exported goods from 2005 to 2006, an
turing. Not all foreign direct investment is      Swedwood facility will employ up to 740          increase for the fourth consecutive year.
for big projects. The average size project        people.                                          From 2002 to 2006, the export of Virginia
based on jobs created is seventy-one jobs,                                                         goods rose an astounding 31 percent.
and based on capital investment is just           “Swedwood’s new facility represents the
more than $10 million.                             second largest investment ever in Southside     Thanks in part to our strategic location
                                                   Virginia,” said Governor Kaine in making        and infrastructure, globalization via export
According to the U.S. Bureau of Economic           the announcement. “The available, trained       trade thrives in Virginia. Virginia industries
Analysis, Virginia accounts for 2.5 percent        workforce pushed Virginia ahead.”               have proven flexible, open to meet the


                                                                                                               Virginia Lawyer                33
International Practice Section

changing needs of a global economy and                                                                               Map courtesy of
recognizing the need to diversify their cus-                                                                         Theodora Maps,
                                                                                                                     www.theodora.com/maps;
tomer base via export trade. Although tra-                                                                           2006 data from World
ditionally dominated by coal and tobacco                                                                             Trade Atlas,
exports, Virginia’s strengths have shifted to                                                                        www.worldtrade
the manufactured goods sector, and more                                                                              statistics.com
recently toward technology and services.
Top exports in recent years include indus-
trial and electrical machinery, vehicles,
plastics, and paper products.

Tobacco and, more recently, coal have
                                                The service sector is large and lucrative.     interesting opportunities for growth in
dominated Virginia exports since the            According to the United States Coalition of    Virginia’s future exports. These markets
state’s founding in 1607. Virginia has diver-   Service Industries, more than 80 percent of    and others—such as Brazil and Russia—
sified to make up for market shifts per-        Virginia’s GDP is generated by the service     are currently industrializing. They have a
taining to declining coal and tobacco sales,    sector, and employs more than 80 percent       growing middle class and governments
although these products remain in               of Virginians. In 2005, Virginia exported      instituting reforms that will likely lead to
demand worldwide. Coal and tobacco              close to $12 billion in services.              increased trade and investment.
remain in the top five exported Virginia
goods. As Virginia develops its strengths in    Encompassing travel, financial, legal, secu-       Connecting Virginia to the World
technology, services, and manufacturing,        rity, and many other industries, the service   Virginia’s advantages for international
the rate of growth for other commodities,       economy in Virginia has a huge impact on       trade are its location and transportation
along with changing demand, will likely         the local economy. In fact, the price and      system. These valuable resources offer
decrease the dominance of tobacco and           quality of services influence other parts of   companies engaged in international busi-
coal exports. Virginia exported 54 percent      the economy, including our competitive-        ness opportunities to get people and prod-
less tobacco in 2005 than in 2001, and          ness in the manufacturing arena, accord-       ucts to or from anywhere in the world.
although coal exports increased by nearly       ing to the Coalition of Service Industries.    With its East Coast location, Virginia is a
one-third in the same period, other com-        The coalition also estimates that the U.S.     gateway to the U.S. for international busi-
modities play stronger roles in Virginia’s      only exports about 5 percent of its ser-       ness by virtue of the Port of Virginia and
economy each year.                              vices. Compared with 20 percent of             Washington Dulles International Airport,
                                                American-made goods that are exported, it      as well as the six major interstate highways
One clear example of Virginia’s shift away      is evident that there is ample room to         and eleven railroads that crisscross the
from coal and tobacco and toward tech-          grow service exports.                          commonwealth. These world-class facili-
nology is the recent rise of digital inte-                                                     ties enable products and people to enter
                                                Whether the export is a service or a tangi-    the U.S. market and access international
grated circuit exports. Otherwise known
                                                ble good, Virginia businesses export to        markets with ease and efficiency.
as microchips, integrated circuit exports
                                                every geographic region in the world. Top
rose to the top of Virginia’s export list in
                                                trading partners include Canada, European      The Port of Virginia comprises three
2006 with more than $1.5 billion in inter-
                                                Union countries, China, and Japan.             marine terminals operated by the Virginia
national sales, overtaking both coal and
                                                                                               Port Authority. The Port of Virginia is the
tobacco products. Export volume of
                                                Virginia sold more than $2 billion in goods    seventh-largest container port in the U.S.
microchips in 2006 nearly tripled that of
                                                to Canada last year, marking the tenth year    and the third-largest on the East Coast.
2004. This represents growth at an
                                                in a row that Canada has been Virginia’s       Over 55 percent of the cargo that is trans-
astounding pace.                                number one export destination. Western         ported via the Port of Virginia originates or
                                                Europe ranked as Virginia’s top export         is destined for locations outside of
Another sign of globalization is found in       region for the ninth consecutive year.         Virginia.
Virginia’s increased export of services. For    Virginia export volumes soared to China
the past decade, service exports have           as well; they rose more than 30 percent        Virginia’s air transportation system also
been slowly growing to dominate                 last year, making China Virginia’s third-      contributes to its strength as an interna-
Virginia’s gross domestic product (GDP)         highest export destination at more than        tionally competitive state. Dulles Airport
and employment. Service exports con-            $900 million.                                  continues to see remarkable growth and
tribute heavily to Virginia’s technological                                                    expansion. International passenger traffic
innovation and growth in skilled jobs,          Emerging markets such as China and India       increased by 13.2 percent in 2006 and
although the subject does not typically         have become key trading partners for           2007. In 2007, 145 new weekly flights to
draw much attention.                            Virginia. Emerging markets also present


34                  December 2007
                                                                                                            International Practice Section

eight new international destinations were
added, and flights to six new countries—           Patrick O. Gottschalk was appointed Virginia secretary of commerce and trade by Gov. Timothy M.
China, Ireland, Kuwait, Panama, Qatar,             Kaine on January 15, 2006. A graduate of the U.S. Naval Academy and University of Virginia Law
                                                   School, Secretary Gottschalk practiced corporate law for twenty-two years prior to joining the Kaine
and Spain—were added. In fact, I had the
                                                   administration.
pleasure of being on the first flight from
Dulles to Beijing, China, in March 2007.           The author thanks Alleyn Harned, assistant secretary of commerce and trade, for his assistance on
                                                   this article.
While Virginia is proactively building
upon its rail and port infrastructure, the
commonwealth must continue to address           cabinet, and Virginia business leaders. It is           from finished in our efforts to adapt to
issues related to congestion on its inter-      a tremendous opportunity to personally                  globalization.
state highways to ensure that the flow of       emphasize to our world partners the
goods is uninterrupted. To address this         importance the commonwealth places on                   There inevitably will be challenges related
issue, Governor Kaine has made trans-           our standing in the global marketplace.                 to globalization that Virginia businesses
portation investments a key priority for                                                                and state organizations must face.
his administration.                             One foreign trade mission, in May 2006,                 Business leaders, our government, and
                                                took us to Canada, Virginia’s top trading               other stakeholders continue to be aggres-
            Virginia Supports                   partner. There, we visited Toronto and                  sive and deliberate regarding Virginia’s
         International Business                 Montreal to strengthen our economic ties                role in the global economy. Issues sur-
In addition to the Kaine administration’s       and promote Virginia’s four hundredth                   rounding the advantages and disadvan-
dedication to improving infrastructure, the     anniversary at Jamestown. In November                   tages of globalization will continue to
commonwealth also has a wide variety of         2006, we traveled to Denmark, Sweden,                   challenge us.
state resources devoted to promoting            the United Kingdom, and Germany to
international trade in general. The Virginia    focus on trade development and busi-                    Founded as a trading company four hun-
Economic Development Partnership                ness recruitment. While in London,                      dred years ago, Virginia has exceeded
focuses on two aspects of international         Governor Kaine also kicked off the                      every expectation as a global player. I am
business — investment promotion and             Jamestown four hundredth anniversary                    confident that Virginians will continue to
export trade promotion.                         celebration at Tower Bridge.                            embrace globalization, ensuring success
                                                                                                        and profitability in the commonwealth for
VEDP maintains investment offices in            More recently, I had the opportunity to                 years to come.
Brussels, Belgium, Tokyo, Japan, Seoul,         lead with my colleague Aneesh P. Chopra,
South Korea, and Hong Kong. The                 the Virginia secretary of technology, what
agency’s trade offices in Mexico City,          is believed to be the largest and most
Mexico, and São Paulo, Brazil, also offer       strategically significant state delegation to
investment assistance. VEDP maintains an        India. At more than one hundred strong,
aggressive marketing program to attract         we traveled to New Delhi, Chennai, and
foreign companies to Virginia, as staff in      Mumbai in April 2007 to cultivate Virginia’s
Virginia and the overseas offices make          relationship with India and open more
direct calls on foreign-owned companies.        doors to increased mutual trade and invest-
                                                ment, particularly in the areas of global
VDEP’s services geared toward export            logistics, agriculture, infrastructure, tech-
trade promotion include not only in-coun-       nology, and research and development.
try market research and export programs
such as Virginia Leaders in Export Trade                   Poised for the Future
and Accessing International Markets, but                     of Globalization
also business matchmaking visits to other       Thanks in part to Virginia’s strategic loca-
countries as part of VDEP’s regular cadre       tion, transportation system, and businesses
of trade missions. As Virginia’s secretary of   dedicated to trade and investment, Virginia
commerce and trade, I’ve been honored to        has responded well to the demands of a
participate in three trade missions with        global economy. We are, however, far
Governor Kaine, other members of his



                                                                                                                      Virginia Lawyer                     35
International Practice Section



     U.S. Trade Policy and Multilateralism—
         The Challenge of Bilateral Trade
                   Agreements
                                              by Kevin J. Fandl




                                                                                  further development of already efficient
                                 T    he present United States approach to
                                      global trade liberalization might be
                                 characterized as a haphazard scramble to
                                                                                  producers in other countries and prevent-
                                                                                  ing U.S. businesses from reaping the
                                 piece together bilateral and regional            rewards of low-cost imports. Second, if
                                 agreements with any willing country. The         multilateral talks continue to starve from
                                 George W. Bush administration has                lack of attention, global liberalization
                                 pushed hard for the conclusion of bilateral      would fail to materialize, again harming
                                 trade agreements with several developing         businesses. Third, U.S. businesses that
The goal of the                  countries by arguing that the agreements         have no incentive to conduct business
                                 will open the door to expanded U.S. mar-         with countries involved in bilateral agree-
                                 kets and will encourage stronger protec-         ments with the U.S. will gain little from the
WTO has long been                tion of U.S. investors in those markets. The     agreements and may suffer compared to
                                 recent conclusion of agreements in Latin         U.S. counterparts that do conduct business
                                 America exemplifies this pattern.                with the countries in the agreement.
to seek elimination              However, is this rushed approach to trade        Finally, bilateral agreements tend to create
                                 liberalization bringing benefits to the U.S.     tension between the U.S. and developing
                                 economy faster, or is it sacrificing true eco-   countries as many developing world citi-
of all barriers to               nomic growth conducted on a more equi-           zens perceive the agreements as unbal-
                                 table multilateral basis that might provide      anced. Accordingly, the resulting backlash
                                 for more sustainable long-term economic          can cut off business opportunities for U.S.
trade in each                    development?                                     investors, as has happened in Venezuela
                                                                                  and other parts of the developing world.
                                 The decision to push for bilateral agree-
member country . . .             ments to the potential detriment of ongo-        Since the inception of multilateral trade
                                 ing multilateral negotiations can have a         and the World Trade Organization’s
                                 significant impact on the U.S. business          (WTO) most-favored-nation principle,
                                 community.                                       economists, policymakers, and business
                                                                                  professionals have concluded that the
                                 In the short run, U.S. businesses stand to       most efficient means for acquiring sus-
                                 gain from bilateral trade agreements             tainable gains from world trade is
                                 through easier access to new markets,            through global trade liberalization. This
                                 potentially lower import costs for raw           means that all countries—developed and
                                 materials, and better protection of their        developing—that subscribe to the WTO
                                 investments in the countries privy to the        would act concurrently to lower tariff and
                                 agreement. Yet in the long run, the effects      nontariff barriers to trade, offering equal
                                 may not be as positive. First, as trade          protections to all other members of the
                                 diversion expands, less-efficient producers      organization. The goal of the WTO has
                                 will become production centers, stunting         long been to seek elimination of all barri-



36            December 2007
                                                                                                    International Practice Section

ers to trade in each member country, leav-      nate all barriers to trade; and they must        is a concern about the equitability of nego-
ing nothing but markets to determine the        eliminate such barriers within a reasonable      tiations between developed and develop-
flow of goods and services across borders.      amount of time.1 These agreements must           ing countries. Numerous trade experts
The wisdom of this principle is supported       be notified to the WTO in advance for            have drawn attention to the power imbal-
by neoclassical economic theory, which          review and subsequent approval. Of the           ance that exists between trade negotiators
forms the basis of many national eco-           more than two hundred such agreements            from a developed country and those from
nomic policies as well as the WTO and           in existence today, only one has been offi-      a developing country.3 The U.S. has a spe-
thus attracts a large support base.             cially approved by the WTO.2                     cialized body that negotiates trade agree-
                                                                                                 ments on its behalf—the Office of the U.S.
Bilateral and regional trade agreements are     There are several concerns about coun-           Trade Representative, which is home to a
concluded between two or more countries         tries entering bilateral rather than multilat-   number of highly trained experts in all
outside the purview of the WTO. These           eral agreements to liberalize trade. On the      areas of trade deemed beneficial to U.S.
agreements are most often, but not always,      economic front, the primary contention is        industry. A developing country usually uti-
between a developing and a developed            that the long-standing WTO principle of          lizes the services of its trade ministry or
country. Because they are not regulated by      most-favored-nation is compromised. This         other body equivalent to the U.S.
the WTO, the parties are free to negotiate      principle specifies that all member states       Department of Commerce to negotiate
their own terms of trade and may include        of the WTO shall receive the same bene-          these agreements. Accordingly, it does not
issues outside the basic exchange of goods      fits as every other member—in other              possess the cadre of experts that the U.S.
and services. These additional issues can       words, if one member state receives a            enjoys, nor is it endowed with resources
include security agreements, commitments        benefit under the agreement, all member          to dedicate to negotiating smaller agree-
to reduce corruption, investor protections,     states must receive the same or an equiv-        ments while also maintaining representa-
intellectual property rights, labor stan-       alent benefit. There can be, in effect, no       tion in WTO negotiations likely to be more
dards, environmental protections, interna-      favored nation. Bilateral and regional trade     friendly to developing countries.
tional enforcement of judgments, and            agreements do exactly the opposite—
restraints on currency controls. The WTO        they provide special benefits to some            Because these negotiations are not limited
does not generally negotiate such matters,      member states that are not provided to           to trade issues alone, U.S. negotiators
as they are not considered direct compo-        other member states of the WTO. For              often push to receive noneconomic bene-
nents of trade.                                 example, if the U.S. offers Singapore duty-      fits. The two areas that have garnered the
                                                free entry of textiles under the U.S.-           most attention in this area are labor and
Countries that engage in bilateral trade        Singapore bilateral free trade agreement,        environmental protections. For example,
agreements generally argue that they are        yet it has negotiated a tariff of 5 percent      the U.S. has made many of its agreements
concluded in good faith with the intention      for WTO member states under its WTO              conditional upon developing countries
of enhancing global trade. Developed            concessions, other WTO member states             adhering to strict labor practices and pro-
countries that pursue such agreements           will suffer by having to pay more than           tections, such as paying reasonable wages
contend that the agreements can lead to a       Singapore for their textile exports to the       to workers. Their primary concern here,
more rapid liberalization process, thereby      U.S. A corollary of this concern is the like-    altruistic as it may appear, is to protect U.S.
avoiding the long delays and barriers to        lihood of trade diversion.                       industry that may wish to compete for
concluding a full multilateral liberalization                                                    market share in the developing country or
process, such as that sought by the WTO’s       In the example above, even if Singapore is       to compete with lower developing-coun-
current Doha Round of trade talks. They         not the most efficient producer of textiles,     try export prices on the U.S. market.
also argue that such agreements can work        their exports to the U.S. will be favored by     Lower wages, a common practice in many
to improve geopolitical and political con-      U.S. consumers because they will be sold         developing countries, allows those coun-
cerns, such as improving the judiciary,         roughly 5 percent less expensively on the        tries to remain competitive on global mar-
reducing corruption, and supporting eco-        U.S. market. If, in fact, India were the most    kets and to encourage the development of
nomic development in the partner devel-         efficient textile producer, Indian manufac-      small businesses that could not afford to
oping country.                                  turers would have to reduce their prices in      pay higher wages. Tougher laws mean less
                                                order to remain competitive with                 competitive edge against the incoming
         Negotiation Imbalance                  Singapore, despite their quality and effi-       U.S. businesses and less competitive
The WTO permits member states to enter          ciency. The result is an imperfect market        exports on world markets.
into bilateral and regional trade agree-        exchange, contrary to the free market aspi-
ments under certain conditions. These           rations espoused by the U.S.                     Environmental protections also greatly
conditions specify that the agreement must                                                       limit a developing country’s economic
not make any member state that is outside       On the noneconomic front, additional             prowess. In the early stages of industrial-
the agreement worse off than before the         concerns about negotiating outside the           ization, as is evident today in India and
agreement; they must substantially elimi-       multilateral context exist. Politically, there   China and historically in the U.S. and



                                                                                                             Virginia Lawyer                37
International Practice Section

Western Europe, pollution is rampant. The         one would pay in a developed country,          region by expanding U.S. economic
infrastructure to limit this toxic prolifera-     unless of course the buyer were a bad          linkages there.5
tion is often not yet in place. Developing-       negotiator. The U.S. wants developing
country governments have neither the              countries to implement more rigid laws to      The Bush administration has pursued a
money nor expertise to invest in pollution        prohibit the manufacture and sale of these     policy of trade negotiations with develop-
reduction schemes. In many instances,             infringing goods, and stronger enforce-        ing countries that uses the threat of
their limited funds are devoted to debt           ment of such laws. Language requiring          removing existing trade preferences or aid
repayment and poverty reduction pro-              stronger laws and better implementation        if the country does not enter the agree-
grams. Yet developed countries—typically          of such laws has become standard in trade      ment on U.S. terms—meaning that a
the largest global polluters—have used            agreements, despite the WTO’s multilater-      developing country party to a negotiation
these provisions to further restrain devel-       ally negotiated intellectual property agree-   has little negotiating room to debate the
oping country competitiveness by raising          ment.                                          demands of the U.S. in exchange for small
the cost of doing business through                                                               openings in the U.S. market. In the case of
required environmental safeguards.                I can speak firsthand of the effect of these   Colombia, the threat was the potential
                                                  clauses from my time living in Colombia        removal of the Andean Trade Preference
              U.S. Trade Policy                   during the negotiation of that country’s       Act (which has expired and was extended
The United States has used bilateral and          trade agreement with the U.S. I witnessed      while Congress debates implementation of
regional trade agreements for a number of         one of their popular black markets, San        the FTA). Removal of these trade prefer-
reasons, the least of which is economic           Andrecitos, shutting down in anticipation      ences, which gave Colombia duty-free
gain. In fact, most of the recently ratified or   of a raid by police—something much             access to much of the U.S. market, would
negotiated trade agreements outside the           more frequent since the conclusion of          be very detrimental to the Colombian
multilateral context have generated only          the agreement.                                 economy. This coercive approach has
minor economic benefit for the U.S. For                                                          caused many developing countries to balk
instance, the recent U.S.-Australia free-         These constraints on trade also can serve      at working on trade deals at all with the
trade agreement has increased the trade           to weaken economic growth in develop-          U.S. Consider Venezuela, for example,
surplus for the U.S. by 32 percent for a total    ing countries. Much of the contraband          which has opted instead to negotiate with
of only $2 billion. The increase was only         sold in developing countries is copied         China and its regional partners, thereby
$4 billion for the agreements with Chile          because original research, development,        diverting potentially beneficial U.S. market
and Singapore. Even over the long term,           and production are not yet feasible. Lack      exchange. Singapore’s own minister of
economic gains have been small. The               of investment in innovative technologies       foreign affairs, George Yeo, said that
Congressional Budget Office reports that          limits the growth of an innovative sector in   developing countries negotiate out of fear
U.S. Gross Domestic Product increased             most countries (with the obvious excep-        and insecurity, rather than economic
only slightly because of the North                tions of China and India), leaving devel-      considerations.6
American Free Trade Agreement (NAFTA),            oping countries with the options of
and not necessarily due to its direct             copying existing technology or reverting       Presidents William J. Clinton and George
effects.4 In developing countries, the news       to primary commodities such as agricul-        W. Bush have enjoyed Trade Promotion
is even less positive. Consider NAFTA,            ture to sustain their incomes, which is        Authority (TPA), which allows them to
which, more than ten years after signing, is      becoming increasingly difficult.               negotiate a trade agreement and, once
hotly debated by economists as to the ben-                                                       signed, present the agreement to Congress
efits for the Mexican economy. Also con-          So why does the U.S. insist on pursuing        for an up or down vote. With TPA,
sider the Free Trade Area of the Americas,        such agreements rather than remaining          Congress may not amend or modify any-
which not only was unsuccessful as an             focused on the floundering Doha                thing in the agreement. This authority is a
agreement, but also may have increased            Development Agenda and other multi-            sharp sword for negotiations, as it pro-
regional backlash against the U.S.                lateral negotiations? The rationale is         vides confidence in the negotiating parties
                                                  largely noneconomic. A recent Heritage         that the agreement will go forward with-
U.S. trade policy is highly protective of its     Foundation report suggests that the pri-       out changes by the U.S. Congress. Without
own innovative economy. Accordingly,              mary basis for evaluating a free trade         TPA, anything that the parties agree to is
the protection of intellectual property is a      agreement includes the partner coun-           subject to modification before approval.
top priority for its trade negotiators. On        try’s support of U.S. economic and for-        However, President Bush lost this TPA in
any street corner in a developing country,        eign policy interests. As an example, the      June 2007, taking away this powerful
vendors pawn off copies of the latest U.S.        report discusses the U.S.-Bahrain agree-       weapon and making the conclusion of
films and music, Rolex watches, Coach             ment, which may be used as a stepping          trade agreements more challenging. Since
sunglasses, and almost anything that can          stone toward the conclusion of a Middle        the Republican Party lost control of the
be copied. The price for these items is           East Free Trade Area that would greatly        Congress, Democrats have asserted that
rarely more than 20 percent of what some-         promote the U.S. security goals in the         they will not approve any pending agree-



38                  December 2007
                                                                                                 International Practice Section

ments without strong labor and environ-        Congress noticed this sentiment and, with      There is also concern about backlash from
mental safeguards. Agreements with             the approaching election, again has made       uneven trade liberalization. Inequality has
Peru, Colombia, and Panama hang in the         trade a central issue. Secretary of State      been steadily growing throughout the
balance as the administration tries to         Condoleezza Rice recently argued that the      developing world, and trade liberalization
attract sufficient support to ratify these     current sentiment both in the Congress         is considered by some as strengthening
pending deals.7                                and among the public at large could lead       existing inequalities. It also is seen as a
                                               to protectionist tendencies, “and we know      mechanism for exerting U.S. influence in
One example of the controversy brewing         from any number of historical experiences      the domestic political affairs of countries
in Congress today involves the pending         that that impulse to protect always leads to   with which the U.S. has strategic interests.
U.S.-Colombia FTA, which, despite the          bad outcomes.” 9                               This is most evident in Latin America,
support of Colombian President Alvaro                                                         where the Free Trade Area of the
Uribe and the Bush administration, is          Yet the U.S. is not the only country pursu-    Americas — the keystone of the Bush
faltering under congressional pressure.        ing bilateral and regional trade agreements    administration’s foreign policy in the
Congress is pushing for more prosecution       with developing countries. The European        region—met with significant resistance
by the Colombian government of right-          Community has engaged in at least              and eventually failed. Several countries in
wing paramilitaries and better enforce-        twenty-three bilateral trade agreements        the region, including Venezuela, Brazil,
ment of the law against human-rights           with countries such as Turkey, Egypt,          Bolivia, and Ecuador, have recently
abusers. With a growing scandal of politi-     Israel, Iceland, and Mexico, and has four      elected left-leaning leaders that have cho-
cal ties to paramilitary groups in the         regional agreements in place with South        sen to slow the pace of liberalization and
Colombian Congress and the hesitation of       Africa, Chile, Mexico, and the European        even in some cases to turn back previous
the U.S. Congress to consider moving for-      Free Trade Area. The European Union            liberalizations by nationalizing some
ward without certain assurances from           (EU) pursues a policy of using bilateral       industries. This backlash is not surprising
Colombia, it seems less and less likely that   and regional agreements as stepping            given the failed U.S. economic interven-
the agreement will be approved before a        stones to larger, multilateral integration.    tions in the region over the past thirty
change in U.S. administration. The situa-      Peter B. Mandelson, EU trade commis-           years. However, the reversal of trade
tion is similar in Panama, where the leader    sioner, argued last year that the EU does      openness has been cause for concern
of their Congress was accused, tried, and      not pursue bilaterals as quick-fix solutions   because it is antithetical to the goals of the
acquitted of killing an American soldier in    to trade problems, but rather as a testing     WTO, and makes multilateral liberalization
1992. Pedro Miguel Gonzalez is still           ground for liberalization issues that the      goals harder to achieve.
wanted in the U.S. on these charges. With      WTO has not yet successfully tackled,
Gonzalez at the head of the Panamanian         such as trade in services.10 He argued that    The Bush administration and other propo-
Congress, the U.S. Congress is unlikely to     the EU is only interested in deep free-trade   nents of unrestricted free trade are wise to
approve the FTA.8                              agreements that liberalize all trade.          seek reductions in trade barriers around
                                                                                              the world and to pursue the goals of eco-
Thus far, the U.S. has successfully con-               Negative Consequences of               nomic development; however, trade at all
cluded agreements with Israel, Canada,           Bilateral/Regional Trade Agreements          costs is not necessarily an intelligent
NAFTA, Jordan, Chile, Singapore,               Liberal free traders—as described by the       approach to achieving this goal. Trade
Australia, Morocco, El Salvador, Nicaragua,    libertarian Cato Institute, for instance—      negotiations outside the multilateral con-
and Honduras. With the recent Costa            suggest that all varieties of trade agree-     text give rise to a significant number of
Rican referendum, an agreement also will       ments are beneficial to global economic        concerns, as highlighted by this brief sur-
be concluded with the Central American         growth. They argue that individuals            vey. While they bring the potential for eco-
region. Agreements with Bahrain,               receive economic freedom when their            nomic growth and improved livelihoods
Guatemala, the Dominican Republic, and         governments lower barriers, so it makes        for some, they also ignite concerns over
Costa Rica have been approved but not          no difference whether the other parties to     inequities and imbalance in trade between
yet entered into force. Agreements with        the agreement reciprocate in order to see      developed and developing countries. The
Oman, Peru, and Colombia are currently         gains.11 However, trade economists such        U.S. has long pushed for a reduction in
under Congressional review. Peru’s agree-      as Jagdish N. Bhagwati and Arvind              barriers to trade, but by employing a hap-
ment is likely to be approved later            Panagariya at Columbia University argue        hazard bilateral and regional approach,
this year.                                     the contrary. They say that agreements         they may be effectuating more negative
                                               concluded outside the protections of the       consequences than positive.
Public opinion in the U.S. lately has turned   multilateral forum severely disadvantage
sour on trade agreements, attesting to a       developing countries by restricting their
growing concern about the loss of U.S.         much-needed flexibility in adapting to the
jobs due to competitive foreign firms and      growing pains of development.
outsourcing to lower-wage countries.                                                                              Bilateral Trade Agreements
                                                                                                                            continued on page 46



                                                                                                          Virginia Lawyer                   39
International Practice Section



        Technology Transfer by Universities
              in the U.S. and Abroad
                                             by Arun K. Sood




Public and private               I  n 1980, the U.S. Congress passed the
                                     Bayh-Dole Act, formally referred to as
                                                                                sion of research universities all over the
                                                                                world. Technology licensing and related
                                 Public Law 96 - 517. This legislation          spin-off activities are handled at two U.S.

universities are                 assigns the intellectual property rights
                                 derived from federal-government-funded
                                                                                universities and four foreign universities—
                                                                                each with research agendas and an orga-
                                 research to a university. Most university      nized effort to interact with industry.

recognizing the                  research in the United States and abroad
                                 is directly or indirectly supported by gov-            Comparative Overview of
                                 ernments. Thus, in the U.S., the Bayh-                      Six Universities

importance of                    Dole Act has provided a strong incentive
                                 for the research-oriented universities to
                                                                                Public and private universities are recog-
                                                                                nizing the importance of technology trans-
                                 pursue technology licensing opportuni-         fer mechanisms as a powerful catalyst for

technology transfer              ties. Universities already participate in
                                 technology transfer — the students are
                                                                                economic development. This is an inter-
                                                                                national trend. Carnegie Mellon University
                                 the vehicle for this transfer, and the         in Pittsburgh, Pennsylvania; Feng Chia

mechanisms as a                  licensing opportunity provides an addi-
                                 tional dimension for the technology
                                                                                University in Taiwan; Indian Institute of
                                                                                Science in Bangalore; the Indian Institute
                                 transfer mission of the universities.          of Technology in Delhi; Stanford

powerful catalyst                In this the Information Age, all govern-
                                                                                University in Palo Alto, California; and the
                                                                                University of Oxford in England have
                                 ments see technology transfer as an impor-     made organized efforts at technology

for economic                     tant element of economic development
                                 and comparative trade advantage, and
                                                                                licensing. These organizations oversee and
                                                                                coordinate patent filings, patent, and
                                 technology licensing and enterprise cre-       “know-how” licensing, and they nurture

development.                     ation has implicitly become part of the mis-   university technology spin-offs. Additional



40            December 2007
                                                                                                                 International Practice Section

information about these institutions can be
found at the Web addresses at right.                             Six Leading Global Universities & Technology Transfer
                                                   Institution                       Unit                                Web Address
The universities structure the technology
transfer organizations in different ways.          Carnegie Mellon University        Center for Technology               www.carnegiemellonctt.com
Some of the institutions establish organiza-                                         Transfer
tions independent of the university struc-
                                                   Feng Chia University (FCU)        Office of Technology                www.ord.fcu.edu.tw/Organize/
ture. For example, University of Oxford                                              Licensing                           enOrganize_otl.html
has set up a company—ISIS Innovations
Ltd. Technology transfer operations at IIT         Indian Institute of Science,      Centre for Scientific               www.csic.iisc.ernet.in/index.htm
Delhi are managed by an independent                Bangalore (IISc)                  and Industrial Consulting
foundation. Oxford’s ISIS has in turn              Indian Institute of Technology,   Foundation for Innovation           www.fitt-iitd.org
formed Oxford University Consulting,               Delhi (IITD)                      and Technology Transfer
which provides the expertise of Oxford
                                                   Stanford University               Office of Technology Licensing      http://otl.stanford.edu
faculty to solve specific problems. Oxford
University Consulting has offices in Japan         University of Oxford              ISIS Innovation Ltd                 www.isis-innovation.com
and the U.S. The ISIS Enterprise division
offers support to the technology transfer
offices at other institutions.                  leads to more enterprise creation. At                       source of start-up funding, and also pro-
                                                Oxford, ISIS started spin-off creation activ-               vide the researchers with key commercial
          University Technology                 ity in 1997. Pre-1998 there were ten spin-                  contacts. The network increases commu-
         Transfer Organizations                 offs over the previous forty years; in 1998                 nity involvement in the university and
University technology transfer operations       there were four spin-offs; and subse-                       provides a critical resource to the faculty
benefit the community. Licensing arrange-       quently an average of more than five spin-                  entrepreneur. For example, early in the
ments provide financial returns for the uni-    off companies have been created per year.                   process of enterprise spin-off, the faculty
versity, inventors, and business owners.        At Carnegie Mellon, seven spin-off com-                     entrepreneur negotiates a licensing agree-
Revenue supports operational costs,             panies were created in 2005. The IIT Delhi                  ment with the university. Since each new
including patent filings. Institutions report   Business Incubator was started in 2000. In                  enterprise is different, each licensing
large variation in the annual income. The       the first five years, twelve spin-offs were                 arrangement is different. All these agree-
Stanford Office of Technology Licensing         sponsored and six companies left the incu-                  ments involve different combinations of
revenue was $50 million in 2004, $61 mil-       bator. In March 2005, six companies                         upfront payment, royalties, equity partici-
lion in 2006, and $384 million in 2005. The     resided in the incubator; all of them had                   pation in the enterprise, and sub-licens-
order of magnitude increase in 2005 was         active faculty involvement.                                 ing arrangements. The degree of
related to the Stanford investment in                                                                       exclusivity has an impact on these terms.
Google. The Feng Chia University average        The importance of organizational support                    Carnegie Mellon provides a template for
annual technology licensing revenue is          for technology transfer is highlighted by                   a term sheet. The angel investor provides
$4.5 million New Taiwan (NT)—about              the Bangalore India Institute of Science                    important input to the entrepreneur and
$150,000 U.S.—with a peak of $10 million        experience. IISc is a premier graduate and                  ensures that the terms do not impede
NT in 2005. Feng Chia has found that tech-      research institute in India started in 1909.                venture funding.
nology transfer enhances the FCU image          Although the master’s and doctoral
and is an effective faculty and student         research efforts at IISc are well-known, the                               Conclusion
recruitment tool.                               enterprise creation efforts have not had                    Organized technology transfer is taking
                                                organizational support. Typically, IISc has                 on increasing importance in the context
             Spin-Offs Require                  provided consulting services to industry.                   of increased international trade and the
           Institutional Support                Discussions with faculty indicate that IISc                 globalization of businesses. Legislation in
All the universities have active spin-off       has recognized the need, and is now                         the U.S. and foreign countries supports
programs. The Stanford and Oxford efforts       establishing an organization to support                     this undertaking. Traditional university
are more mature than those at other insti-      technology transfer. The Society for                        research focus on scholarly work is now
tutions. The Stanford Office of Technology      Innovation and Development has been set                     being influenced by the commercial pull.
Licensing has a staff of thirty and the         up in collaboration with IISc.                              Since this research is often government
Oxford ISIS a staff of forty. However, even                                                                 funded, the Bayh-Dole Act has been
the smaller units play a crucial role in              Angel Networks for New                                instrumental in increasing the technology
encouraging entrepreneurship at the uni-                  Venture Support                                   licensing focus at universities. Not all fac-
versity. Establishing an administrative unit    Oxford has established the ISIS Angels                      ulty members participate in the technology
for patent filings and spin-off management      Network. Angel groups are useful as a                       licensing efforts, but the presence of



                                                                                                                        Virginia Lawyer                     41
International Practice Section

organized technology licensing initiatives
on the university campus is increasing fac-                                              Arun K. Sood is professor of computer science at
ulty involvement. Universities are using                                                 George Mason University. He received his undergradu-
incentives such as a share in the revenue                                                ate degree at the Indian Institute of Technology, Delhi,
derived from licensing fees to encourage
                                                                                         and his master’s and doctorate at Carnegie Mellon
faculty involvement. This article, by exam-
                                                                                         University. Photo of Sood (left) with former Virginia
ining six universities in four countries,
demonstrates that the trend for university                                               governor Mark D. Warner in India.
technology licensing is widespread.

In conclusion:

• There is an increasing global awareness
  of the role universities play in economic
                                               The University of Virginia has a technology      secretaries of commerce and trade and
  development.
                                               licensing program managed by the                 technology actively promote technology
                                               University of Virginia Patent Foundation         as a component of the new common-
• One aspect of this critical role is the
                                               (UVPF). The Technology Transfer Office at        wealth’s policy of embracing globalization.
  increasing importance of promoting
                                               the College of William and Mary also works
  technology transfer from universities to
                                               with UVPF. At Virginia Tech and George           Virginia universities play an important
  the private sector.
                                               Mason University, technology licensing is        role in the economic development of
                                               managed by Virginia Tech Intellectual            the commonwealth and promote eco-
• This commercialization of university tech-
                                               Properties Inc. and George Mason                 nomic ties in this time of globalization.
  nology is crucial for developing and
                                               Intellectual Properties Inc. respectively.       Transfer of technology is critical to this
  maintaining comparative trade advantage.
                                                                                                undertaking. Virginia universities are
                                               The Commonwealth of Virginia recog-              competing well with both national and
• Legislation is essential in promoting this
                                               nizes the importance of commercializing          international universities, but the chal-
  process of commercial innovation.
                                               university research in technology, as evi-       lenge is to move forward and participate
                                               denced by the long-time establishment of         even more forcefully.
• Barriers to technology transfer are often
                                               the Center for Innovative Technology.
  those internal to universities, but they
                                               The Virginia Economic Development
  can be alleviated by diligent manage-
                                               Partnership and the executive branch’s
  ment of faculty relations.




42                 December 2007
International Practice Section



Trade Liberalization Despite Doha’s Delay
                                          by Robert A. Rogowsky




                                                                                 been slow. Negotiators for the former are
                                 T    he Doha Round of multilateral trade
                                      negotiations appears to be, as some
                                 have labeled it, on life support. Desperate
                                                                                 still trying to settle on the “modalities” or
                                                                                 method of the negotiation.
                                 measures are taken weekly to sustain and
                                 possibly resuscitate it. While the round        Second, the success of the Uruguay Round
                                 officially began November 2001, negotia-        Agreement is a problem for the Doha
                                 tions in services and agriculture, as dic-      Round. The URA is a broad-reaching
                                 tated by the preceding Uruguay Round            agreement that brought under World
                                 Agreement (URA), started in 2000 and            Trade Organization discipline, indeed
                                 have been grinding on for seven years.          created the WTO, matters that for decades
Despite bleak prospects,         After more than half a decade, the talks        had been too politically sensitive to
                                 have nearly collapsed. Despite bleak            be included.
                                 prospects, there is much to be optimistic
there is much to be              about, unless you are a trade minister          Early rounds focused on tariffs. The Tokyo
                                 whose job success is tied to completing a       Round (1973–79) opened discussions of a
optimistic about, unless         round. Ultimately, the Doha Round is            few non-tariff measures — like subsidies
                                 likely to succeed, but not for many years.      and antidumping. But the URA opened
                                 In the meantime, significant trade liberal-     whole new areas for liberalization. Textiles
you are a trade minister         ization will continue while the negotiators     and agriculture were brought under WTO
                                 painstakingly labor toward more funda-          discipline. The agreement restructured the
whose job success is             mental reforms on the agenda.                   dispute settlement rules, creating a more
                                                                                 forceful adjudicative body. Services were
                                                                                 introduced and concluded with the General
tied to completing                            The Doha Round
                                                                                 Agreement on Services, including separate
                                 First, the round will be lengthy. Each of
                                 the eight preceding rounds took longer          agreements on financial services and
a round.                         than the one before. The Uruguay Round          telecommunications.       New agreements
                                 lasted eight years. If the length of the pre-   were reached on Trade Related Intellectual
                                 vious eight General Agreement on Trade          Property, Trade Related Investment
                                 and Tariffs negotiations is any measure,        Measures, Sanitary and Phyto-Sanitary
                                 the Doha Round will last twelve years. By       Measures (to prevent them from being used
                                 that calculation, we are only halfway           as trade barriers), and Technical Barriers to
                                 through. Why does it take so long? The          Trade. The Trade Review Mechanism was
                                 low-hanging fruit was picked decades            created to audit members’ progress on a
                                 ago. Negotiators are digging into highly        regular basis. Bi-annual ministerial meet-
                                 sensitive areas that domestic political         ings were set up to ensure regular attention
                                 forces in every country are well-equipped       at the highest levels.
                                 to resist. Intensely sensitive agriculture
                                 negotiations have stymied progress of the       Third, the URA instituted the principle of
                                 round. Progress in both industrial tariffs in   “single undertaking” wherein every mem-
                                 developing countries and services also has      ber agrees to every element of the agree-



44            December 2007
                                                                                                     International Practice Section

ment. A member cannot pick and chose,            favored-nation tariff bound under the URA        equivalent to eighty-two days of growth
but must accept the whole agreement and          exceeded 31 percent. But Brazil has low-         for Brazil at its average rate of growth from
all its parts. Once considered among the         ered tariffs to a trade weighted average of      2000–05.3 For India, it is twenty-four days
most valuable accomplishments of the             8.2 percent. India similarly has lowered its     of growth, and for China only three days.
URA, it now appears to be its Achilles heel.     URA bound tariffs from nearly 50 to 14.6         It becomes clearer why trading partners
                                                 percent, South Africa, from nearly 20 to 5.1     are reluctant to concede sensitive trade
Single undertaking becomes a problem in          percent, and Turkey from nearly 30 to 4.8        protections when broader economic
part because of the success of the WTO in        percent. The World Bank’s Global                 growth overshadows the potential gains.
attracting members. The Kennedy Round            Economic Prospects 2005 indicates that           Happily, it also becomes increasingly clear
(1962–67) involved forty-eight parties and       two-thirds of tariff cutting was the result of   to growth-oriented nations, as economic
covered $40 billion in trade. The URA            unilateral trade reform, 25 percent is from      theory shows, that there is good reason to
involved 120 members and $3.7 trillion in        multilateral negotiations, and the rest is       liberalize unilaterally.
trade. The WTO currently has 151 mem-            from preferential trade agreements.
bers, and the current negotiations touch                                                                      Dispute Resolution
on more than $5 trillion in trade. Fewer         Ironically, the greater the difference                        and Liberalization
than three dozen members are considered          between the bound rates and the applied          Finally, regardless of progress made in the
developed nations. The developing and            rates, the larger the cuts in bound rates        Doha negotiations, a remarkable amount
less developed countries range from              that are required to affect actual rates, the    of liberalization continues through the dis-
China, India, and Brazil to Indonesia,           ones that matter to exporters. The larger        pute settlement mechanism. Since 1994,
Paraguay, and Burkina Faso. Common               the cuts needed, the harder it is to negoti-     roughly 360 complaints have been filed.
ground is scarce.1                               ate, and yet the less valuable it is for         While only about 30 percent of the mem-
                                                 exporters to expend scarce political capital     bers of the WTO have been involved, and
In the grim atmosphere of the Doha Round,        lobbying for it (and against protection-ori-     disproportionately, the United States and
much is encouraging. Trade negotiations          ented groups). Similarly, aggressive com-        the European Union, important barriers to
are intensely political events. Powerful         petition for foreign direct investment has       trade, are under growing attack from the
political forces are at work to prevent liber-   pushed countries to offer protections and        juridical process the dispute settlement
alization. If the necessary countervailing       other enticements to encourage invest-           mechanism offers. Fewer than than a third
pro-trade forces are not active, that it is      ment. This has substantially reduced the         of the complaints have required more than
because the gains from freer trade are           incentive for trade-oriented industry to         consultations to resolve. Of those that go to
already occurring on their own.                  expend political effort to get a more com-       a dispute panel or through appellate body
                                                 prehensive Trade Related Investment              review, about 90 percent identify violations
    National, Bilateral, and Regional            Measures package.                                that must be corrected. Virtually without
               Liberalization                                                                     exception, members found in violation
Over the past decade, a substantial              Many countries are reducing the non-tar-         express intent to correct the problem, and
amount of liberalization occurred outside        iff barriers (NTBs) blocking trade. The          in many cases have already done so.
the multi-lateral negotiations, and this will    World Bank reports that developing               Retaliation, the remedy for non-compli-
continue. Bilateral and regional agree-          countries have substantially reduced core        ance, has been requested in fewer than 20
ments, such as the North American Free           NTBs (including quantitative restrictions,       percent of the adjudicated cases.
Trade Agreement and Mercosur, have               price administration, and monopolistic           Retaliation has been authorized in only
opened many markets. Nearly 400                  trading channels). In 1989, more than 30         eight cases and was not even used in some
regional agreements have been notified to        percent of tariff lines in East Asia and         of them.4
the WTO. Some are modest initiatives, but        Pacific countries had core NTBs, but only
many are robust free-trade arrangements.         5.5 percent had them in 2004. South Asia         Members have taken to dispute settlement
The United States alone has completed ten        fell from 57 to 13 percent, and the Middle       highly sensitive matters that have plagued
free-trade agreements covering fifteen           East and North Africa from 44 to 8.5 per-        trade negotiations for decades, including
countries and has many more in the               cent. These trends are hard on those that        Canadian softwood lumber stumpage fees,
pipeline, including a Framework for              we need support for negotiations, but            the U.S. foreign sales corporation tax, the
Transatlantic Economic Integration.              ironically because progress is being made        European Union’s hormone-treated beef
                                                 through other routes.                            ban, the European banana distribution
An even more powerful type of liberaliza-                                                         restrictions, safeguards, and numerous
tion is unilateral reform. Many countries        The pressure to liberalize also is muted         complaints on anti-dumping and counter-
are already reducing tariffs well below          when economies are growing rapidly. It           vailing duty enforcement (including the
their maximum level—the “bound” rate             has been calculated that the even the high-      practice of “zeroing”). In the past two
that the country negotiated in the URA.2         est estimates of economic welfare gain           years, seven cases aimed at intellectual
For instance, Brazil’s average most-             from a successful Doha Round would be            property protection, including barriers to



                                                                                                              Virginia Lawyer              45
International Practice Section

entertainment products and refunds,
reductions, and exemptions from taxes,                                        Robert A. Rogowsky is adjunct professor at the School of Public Policy,
have been filed against China. China has                                      George Mason University and director of operations at the United States
filed one against the U.S. Agricultural sub-                                  International Trade Commission. Any opinions are strictly his own.
sidies—slow in negotiation—are increas-
ingly challenged in the dispute process.
Brazil successfully challenged EU sugar
subsidies and U.S. cotton subsidies.
Canada has challenged U.S. corn subsi-
dies. Brazil recently filed a broad-spectrum
                                                 ily in trade at the expense of other areas of             4   Bruce Wilson, “Compliance by WTO Members
“request for consultation” (first step to a                                                                    with Adverse WTO Dispute Settlement Rulings:
                                                 concern; and the growing realization by                       The Record to Date,” J. of International
formal complaint) with the U.S., identify-
                                                 growth-oriented emerging markets that                         Economic Law, June 1, 2007.
ing violations for multiple agricultural sup-
                                                 unilateral reform works.                                  5   United States—Domestic Support and Export
port programs aimed at a long list of plant                                                                    Credit Guarantees for Agricultural Products,
and animal products.5                            Endnotes:
                                                                                                               WT/DS365/1, 17 July 2007. Including production
                                                                                                               flexibility contract payments for each of wheat,
                                                 1   Coalitions, however, are plentiful, including, but        corn, grain sorghum, barley oats, upland cotton
The Doha negotiation may be in terminal              not limited to, the G-4, G-8, G-20, G-90, the             and rice; non-insured crop disaster assistance
                                                     Group-of-110, the Cairns group, the NAMA-11,              payments; crop disaster payments, emergency
decline. More likely, it is simply bed-rid-          the Africa/Caribbean/Pacific Group, the “Cotton           feed and other feed program payments for each
den until after the U.S. and Indian elec-            4,” and the Like-Minded group, each with its own          of beef, veal, dairy, hogs and pigs, sheep, and
                                                     agenda.                                                   lamb; tree assistance programs for apples, apri-
tions. The negotiation is in this condition                                                                    cots, peaches, pears, and all other trees, bushes,
                                                 2   Elborn-Woteck, et al.,” Fiscal Implications of            and vines; programs exempting farmers from fuel
at least in part because of the solid institu-       Multilateral Tariff Cuts,” IMF Working Paper,             taxes or from taxes based on overall farm
tional foundation left by the URA; the               September 2006.                                           income; subsidies related to irrigations works.
rapid globalization regardless of negotia-       3   Simon Evenett, “Doha’s Near Death Experience at
                                                     Potsdam: Why Is Reciprocal Tariff Cutting So
tions; the perception by export-oriented             Hard?”, June, 2007, mimeo.
interests that they need to invest less heav-




Bilateral Trade Agreements
continued from page 39

To be successful in raising global living
standards, eliminating tariff and nontariff                                   Kevin J. Fandl is a doctoral candidate in public policy at George Mason
barriers, and allowing markets to operate                                     University as well as an adjunct professor of law at the American University
freely, the U.S. should be concentrating its                                  Washington College of Law.
vast resources on concluding the Doha
Round of negotiations at the WTO. The
successful conclusion of this trade and
development agenda will do far more for
economic growth than any number of
smaller agreements, and will do so with-
                                                 Endnotes:                                                 5   Daniella Markheim, America’s Free Trade Agenda:
out the potential for severe backlash                                                                          The State of Bilateral and Multilateral Trade
                                                 1   General Agreement on Tariffs and Trade, art. XXIV
among developing countries that threatens                                                                      Negotiations, Heritage Foundation Backgrounder
                                                     (1994).
                                                                                                               (Nov. 2, 2005).
to derail all efforts to conclude a multilat-    2   Referring to the customs union between the
                                                                                                           6   Guy de Jonquieres, “The Challenge for the
eral agreement. A wise trade policy is an            Slovak and Czech Republics. See CONSULTATIVE
                                                                                                               Multilateral Trade System”, Yale Global Online,
                                                     BOARD, WORLD TRADE ORGANIZATION, THE FUTURE
essential component of an effective for-                                                                       Nov. 18, 2002.
                                                     OF THE WTO: ADDRESSING INSTITUTIONAL
eign policy, and the two are largely inter-          CHALLENGES IN THE NEW MILLENNIUM 21-22 (2004),        7   Neil Irwin, “A Shift in Bush’s Trade Politics,”
                                                     available at http://www.wto.org/english/thewto_e/         Washington Post (Oct. 10, 2007).
linked. Pursuing U.S. economic power by              10anniv_e/future_wto_e.pdf.
                                                                                                           8   Id.
coercing developing countries with little to     3   See, e.g., Kevin J. Fandl, Bilateral Agreements and
                                                                                                           9   Id.
offer the U.S. into trade agreements may             Fair Trade Practices: A Policy Analysis of the
                                                     Colombia-U.S. Free Trade Agreement (2006), 10         10 Peter Mandelson, “Bilateral Agreements in EU
weaken the U.S. position in global trade             YALE HUMAN RTS. & DEV. L.J. 64 (2007).                   Trade Policy” (speech at London School of
negotiations as well as on the foreign pol-      4   Robert McMahon, The Rise in Bilateral Free Trade
                                                                                                              Economics, Oct. 9, 2006).
icy stage.                                           Agreements, Council on Foreign Relations (June        11 Edward L. Hudgins, “Regional and Multilateral
                                                     13, 2006).                                               Trade Agreements: Complementary Means to
                                                                                                              Open Markets,” 15 Cato Journal No. 2-3
                                                                                                              (Fall/Winter 1995/96).




46                       December 2007
                  V   I R G I N I A         A   S S O C I AT I O N         O F     L   AW   L   I B R A R I E S


              Six Steps to a Smaller World:
      Finding International Law from Your Desktop
                                                          by Jennifer Sekula



Researching the law of another country          searches that combine the topic and         The most comprehensive foreign
is one of the most challenging, yet             the name of the country. If you need to     research guide of all is the Foreign Law
interesting, tasks an attorney can take         know whether a divorce is valid under       Guide, a subscription-only online prod-
on. Every country presents potential            Ugandan law, for example, the search        uct (also published in print as Foreign
obstacles to the researcher, including          Uganda /p divorce in LexisNexis.com or      Law: Current Sources of Codes and
unfamiliar legal systems and terminol-          Westlaw’s journal database returns an       Basic Legislation in Jurisdictions of the
ogy, varying levels of access to laws           article that cites and discusses six        World). The guide includes the names
and related materials, and possibly one         diverse laws that govern marriage and       and citations to translations (if avail-
or more different languages to contend          divorce in that country.                    able) of more than 170 countries’
with. Despite all the variables, the fol-                                                   codes, official journals, and other gen-
lowing steps can help you get started           Look it up in Martindale-Hubbell.           eral legal sources. It also lists specific
with your research into any                     MH includes a helpful volume called         laws of each country by subject, with
country’s laws.                                 the International Law Digest (also          citations to translations if they exist.
                                                available on LexisNexis.com). The digest,
Start at the beginning. Take a                  written by local attorneys, provides a      Nail down the text of the law.
moment to acquaint yourself with the            reasonably detailed, concise overview       Once you have your citation, the
country’s legal system so you can               of a given nation’s laws, with citations    quickest way to locate the law is to
understand the relevance of the docu-           to relevant statutes or regulations. It     search for it using an Internet search
ments that you’ll find later. Many              covers eighty-one countries and the         engine. If this doesn’t work, try one
research guides, in print or online, con-       European Union, including most of the       of the Legal Information Institutes,
tain such introductions. Alternatively,         larger jurisdictions.                       which are Web sites that collect pri-
try searching in Google or another                                                          mary documents (collectively listed
Internet search engine using the name           Seek out official Web sites of dif-         as “databases”) and links to laws (col-
of the country and “legal system” or            ferent countries about their                lectively labeled “catalogs”) from var-
“research guide.”                               laws. Stuart S. Malawer provides            ious countries. The biggest one is
                                                some links on his Web site at               WorldLII (www.worldlii.org), where you
See if someone else has already                 www.InternationalTradeRelations.com ,       can find links to regional LIIs at the
blazed the trail. Imagine researching           under “Foreign Source Material.”            bottom      of    the    main       page.
an issue within the U.S. law of sales                                                       LexisNexis.com and Westlaw are addi-
without having ever heard of the                                                            tional sources for laws, but only for a
Uniform Commercial Code. You would              Find a “Research Guide” on your             handful of foreign jurisdictions. Finally,
stumble across thousands of cases with          country and/or topic. If none of the        if your law is reprinted in a book but
no idea of what their significance is—          above suggestions help, you can set         you don’t have access to it, see if you
or whether there’s other law on point.          out on your own with the aid of a           can obtain the book from a library.
To make sense of it all, you would look         good, up-to-date guide to direct you to
for a good secondary source that                the resources where a country’s laws        Exercise caution when using transla-
explains the law and leads you to the           can be found. One of the best free sites    tions of laws. Even “official” transla-
most relevant statutes and decisions.           out there is GlobaLex from New              tions are not always as reliable as one
Foreign research is no different. Check         York University (www.nyulawglobal.org/      might hope. Furthermore, many codes
treatises, academic and bar journal arti-       globalex/), which publishes guides by       and cases have not been translated into
cles, and free Web sites for descriptions       lawyers and librarians on countries
of and citations to the laws of the coun-       from Afghanistan to Zimbabwe.                           Finding International Law
try in which you’re interested. Try                                                                                   continued on page 48




                                                                                                          Virginia Lawyer                    47
     Finding International Law
     continued from page 47

     English. You may wish to retain the ser-
     vices of a translation firm or local coun-                          Jennifer Sekula is the senior reference librarian/foreign and interna-
     sel to be certain that you are reading an                           tional law specialist at the College of William and Mary School of
     accurate version of the law.                                        Law. She received a bachelor’s degree from W&M, a juris doctorate
                                                                         and master of studies in environmental law from Vermont Law School,
                                                                         and a master’s in library science from Catholic University of America.
     Treaties. If you discover that you actu-                            She is a member of the Virginia Association of Law Libraries.
     ally need a treaty and not a foreign law,
     here are three sources to consult: Many
     multilateral treaties are administered by
     secretariats, which typically maintain
                                                  Westlaw both include every treaty to             sive research tool called EISIL
     Web sites that are great sources of a
                                                  which the U.S. is a party, starting with         (Electronic Information System for
     reliable version of the text. Enter the
                                                  1776 and 1778 respectively. Finally, the         International Law; www.eisil.org), which
     name of the treaty plus the word “sec-
                                                  American Society of International Law            can help you locate treaties by subject,
     retariat” into an Internet search engine.
                                                  (www.asil.org) offers a free, comprehen-         among other useful features.
     Additionally,       LexisNexis.com    and




48                    December 2007
International Practice Section

Trade Litigation continued from page 31                       (EU Press Release September 5, 2006); “U.S. Auto
                                                              Action Against China.” (USTR Press Release
                                                                                                                   27 Baucus, Grassley, Schumer and Graham, “We
                                                                                                                      Must Act When Currencies Become Misaligned,”
                                                              September 25, 2006); “China’s Reaction.” China          Financial Times (July 6, 2007); “International cur-
existing rules-based system. It also means                    Ministry of Commerce (MOFCOM) News Release              rency exchange rate policies are contributing to
taking greater advantage of the consulta-                     (September 20, 2006).                                   global economic instability.” See also, “Four in
                                                                                                                      Senate Seek Penalty for China,” New York Times
tion stage in the dispute resolution system,              13 DS 340.
                                                                                                                      (June 14, 2007).
where it can be more effectively utilized to              14 “China Threatens WTO Claim Over US Export
                                                                                                                   28 Nicholas Kristof in “The New Democratic
                                                              Duties.” Financial Times (September 17, 2007).
settle contentious cases involving specific                                                                           Scapegoat,” New York Times (July 26, 2007) decries
                                                              “Official China Announcement—WTO & Paper
                                                                                                                      Hillary Clinton’s and Barack Obama’s China trade
and divisive trade issues. This stage                         Dispute Consultations.” MOFCOM (September 17,
                                                                                                                      pronouncements as “cowboy diplomacy.”
                                                              2007).
requires traditional diplomatic negotiations                                                                       29 “Paulson Warns Against Legislation on China,”
                                                          15 China was a complainant along with other nations
to occur in a confidential context. This                                                                               New York Times (September 11, 2007).
                                                             against the United States concerning President
reliance on more vigorous negotiations                       Bush’s safeguard measures on steel in 2003. (DS       30 “A Shift in Bush’s Trade Politics,” Washington Post
                                                             252) It also has threatened to bring an action            (October 10, 2007).
would be better for U.S.-China bilateral                     against the European Union over antidumping
                                                                                                                   31 “Showdown Looms on China Trade,” Wall Street
relations and enhance global governance                      duties on shoe imports from China. “EU Faces
                                                                                                                       Journal (June 5, 2007).
                                                             Double Court Threat on Shoe Tariffs,” Financial
of trade. Furthermore, it would strengthen                   Times (October 5, 2006).                              32 “Administration Declines Section 301 Petition on
the rules-based multilateral system.50 The                16 DS368 (Request for consultations received
                                                                                                                       China’s Currency Policies.” USTR Press Release
                                                                                                                       (6.13.07).
WTO Director-General Pascal Lamy                             September 14, 2007).
                                                                                                                   33 “Free-Trade Fight Reflects Broader Battle,”
recently concluded, “[T]he WTO is an                      17 The U.S. Court of International Trade refused to
                                                                                                                       Washington Post (October 12, 2007); “How a
                                                             stop the action on subsidies against China that is
engine, a motor energizing the interna-                      pursuant to the U.S. government’s new policy that
                                                                                                                       Breakthrough in Trade     Broke Down in
                                                                                                                       Congress,” Washington Post (November 22,
tional legal order . . . a catalyst for interna-             imports from nonmarket economies (NME) may
                                                                                                                       2007).
                                                             be considered a subsidy and subject to counter-
tional mutual respect towards international                  vailing duties. People’s Republic of China v. U.S.    34 “A New Populism Spurs Democrats on the
coherence and even for more global gov-                      (Court No. 07-00010) (March 29, 2007). “China             Economy,” New York Times (July 16, 2007).
                                                             Dissatisfied with Trade Action.” (China Ministry of
ernance, which I believe is needed if we                     Commerce, Press Release April 3, 2007).               35 The issue of currency valuation in both interna-
                                                                                                                      tional trade law and international finance law is
want the world we live in to become less                  18 “China Trade Mission to the WTO News Release.”           complex and unsettled. It raises issues concerning
violent . . .” 51                                             (April 25, 2007).                                       the interplay of different international agreements.
                                                                                                                      Neither the WTO Agreements nor the International
                                                          19 “China’s Ministry of Commerce News Release.”
                                                                                                                      Monetary Fund Agreement specifically addresses
Endnotes                                                     (April 3, 2007).
                                                                                                                      the issue of currency manipulation as a trade restric-
1 “The biggest challenge in international economic        20 “Remarks by U.S. Trade Representative Susan C.           tion or subsidy.
   policymaking is the incorporation of China (into           Schwab on U.S.-China Relations.” (October 23,
                                                                                                                       • WTO /GATT — Article         XV      [“Exchange
   the trading system).” Martin Wolf, “The Right Way          2007).
                                                                                                                         Arrangements”] (4): “Contracting parties shall
   to Respond to China’s Exploding Surpluses,”
                                                          21 “China-U.S. Talks Continue, Amid Legal Volleys,”            not, by exchange action, frustrate the intent of
   Financial Times (May 30, 2007).
                                                              New York Times (July 30, 2007).                            the provisions of this Agreement . . .”
2    For a general review of WTO litigation and the
                                                          22 “G-7 Steps Up Pressure on China on Currency,”             • International Monetary Fund Agreement —
     role of the United States in it, see Malawer,
                                                             Washington Post (Oct. 22, 2007).                            Article IV [“Obligations Regarding Exchange
     “Litigation and Consultation in the WTO: 10th
                                                                                                                         Agreements”] (1)(iii): “. . . avoid manipulating
     Anniversary Review,” Virginia Lawyer (June/July      23 “The U.S.-China Joint Commission on Commerce
                                                                                                                         exchange rates or the international monetary
     2005). See also, Lawrence, “The U.S. and the WTO         and Trade (JCCT) — Outcomes on U.S. Request.”
                                                                                                                         system in order . . . to gain an unfair competi-
     Dispute Settlement System.” (Council on Foreign          (USTR April 11, 2006). The annual report con-
                                                                                                                         tive advantage over other members . . .”
     Relations 2007).                                         cerning China’s WTO compliance released by
                                                              the USTR contends compliance has been a              36 “China’s Economy Set to Grow by Over 11%,”
3    “USTR Press Release—Remarks.” (Feb. 22, 2007),
                                                              mixed picture. “2006 Annual Report on China’s            Financial Times (October 26, 2007).
     “USTR Chinese Subsidy Fact Sheet.” (February 2,
                                                              WTO Compliance.” (USTR 2007). The USTR
     2007) and “USTR Press Release.” (February 2,                                                                  37 “China on Course to Lead World IPO League,”
                                                              released the 2007 special intellectual property
     2007). The status of four U.S. cases against China                                                                Financial Times (July 5, 2007).
                                                              report, which singled out China and Russia as
     in the WTO/DSU is reviewed. “WTO Begins
                                                              the main offenders. 2007 Special 301 Report          38 “There’s Peril in the Parallels as China Takes a Top
     Formal Probe into Alleged Chinese Subsidies.”
                                                              (USTR 2007). See also, “U.S. China Trade                 Spot,” New York Times (October 20, 2007).
     Wall Street Journal (August 31, 2007). “Official
                                                              Relations: Entering a New Phase of Greater
     China Reaction against Subsidy Case Filed in                                                                  39 “Transformed China is Ready for Overseas
                                                              Accountability and Enforcement — Top-to-
     Feb. 2007.” (China Embassy to the U.S.)                                                                           Investment,” Financial Times (August 8, 2007).
                                                              Bottom Review.” (USTR 2006).
     (September 4, 2007).                                                                                              See also, “Treasury Official Warns Over Sovereign
                                                          24 “Antidumping—Initiations & Final Actions.” WTO            Wealth Funds,” Financial Times (June 22, 2007).
4    DS 358.
                                                              News Release (June 11, 2007). The WTO reported
5    DS 359.                                                  that the EU initiated the highest number of new      40 Gideon Rachman, “Russia and China Challenge
                                                              cases for the last six months of 2006, and China        the West,” Financial Times (October 23, 2007).
6    Official USTR Releases: “U.S. Files WTO Cases
                                                              remains the target of the most new investiga-        41 Gideon Rachman contends that both Russia and
     Against China.” (USTR April 9, 2007); “IPR Legal
                                                              tions. However, it was India that launched the          China present an ideological challenge to the West
     Regime.” (USTR April 9, 2007); “Market Access
                                                              most new safeguard actions and applied such             by relying on “authoritarian nationalism,” rather
     Restrictions.” (USTR April 9, 2007).
                                                              final measures from January 1, 1995, through            than embracing liberal democracy for their eco-
7    DS 362.                                                  October 23, 2006. “WTO Announces Latest                 nomic prosperity. He poses the intriguing ques-
                                                              Statistics on Safeguard Actions.” WTO News              tion, “Was it wrong to suppose globalisation and
8    DS 363.                                                  Release (November 29, 2006).                            economic growth would eventually mean that
9    DS 309.                                              25 “Nations Dust Off Their Antidumping Duties in            Russia and China would become liberal democra-
                                                              Response to Chinese Pricing,” Financial Times           cies?” It seems wrong to conclude that the end of
10 “U.S. and China Resolve WTO Dispute Regarding
                                                              (October 24, 2007).                                     the Cold War meant that ideological arguments
    China’s Tax on Semiconductors.” (USTR News
                                                                                                                      concerning economic prosperity were over.
    9.15.06).                                             26 See generally, “Paulson Warns Against Legislation
                                                             on China,” New York Times (September 11, 2007);       42 Martin Wolf, “We Are Living in a Brave New World
11 “U.S. Requests WTO Panel in China’s Treatment of
                                                             “Congressional Momentum Grows to Punish                  of State Capitalism,” Financial Times (10.17.07).
    Auto Parts.” (USTR News July 8, 2004).
                                                             China Over Yuan Value,” Wall Street Journal              He states, “The big truth is that contemporary
12 EU and U.S. complaints against China concerning           (August 2, 2007); “Showdown Looms on China
   its tariffs on auto parts have caused China to react      Trade,” Wall Street Journal (June 5, 2007).
   vigorously against it. See, “EU’s Request for Panel”                                                                       Trade Litigation continued on page 57

56                      December 2007
Trade Litigation continued from page 56
    globalization has brought players into the game       47 For an earlier discussion of litigation versus nego-      48 Lawrence, “The U.S. & the WTO Dispute
    that operate by different rules from those               tiation within the WTO system see, Esserman and              Settlement System.” 6 (Council on Foreign
    espoused by today’s high-income countries; vast          Howse, “The WTO on Trial,” 82 Foreign Affairs                Relations 2007).
    state-owned companies . . . countries that accept a      130 (January/February 2003). The authors state,
                                                                                                                       49 Id. at 18 and 20.
    bigger role of the state in markets than western         “Less often considered is whether this ascendant
    countries do today.”                                     legalism is good or bad for global prosperity and         50 Director-General of the WTO Pascal Lamy
                                                             stability. In most cases, it turns out, it is still too      declares in “WTO & Global Governance”
43 “This would seem to be an odd time for Congress
                                                             early to say. There is one exception, however: the           (November 1, 2006) that “The WTO is neverthe-
    to start a trade war with China.” “Wrong Target,”
                                                             WTO. Nowhere else has international conflict res-            less a laboratory for harnessing globalization and
    Washington Post (June 22, 2007).
                                                             olution by judges emerged more forcefully or                 contributing to the construction of a system of
44 “Another Shot in Currency Fight: Chinese Threaten         developed more rapidly . . . An accurate assess-             global governance. A place where evolving global
    Divestment,” Washington Post (August 10, 2007).          ment of the WTO’s judicial record finds that the             governance can find some roots in ensuring legit-
                                                             system has indeed reduced the role of interna-               imate decision-making.”
45 “U.S. industry is divided over a decision by the          tional diplomacy, while strengthening the rule of
    Bush administration to file two cases today              law.” See also, “And if negotiations are fruitless,       51 Pascal Lamy, “The Place and Role of the WTO
    against China at the World Trade Organization            litigation takes over” in “How Lawsuits are                  (WTO Law) in the International Legal Order.”
    over restrictions on foreign media and piracy.”          Coming to Dictate the Terms of Trade.” Financial             WTO News Release (May 19, 2006) (address before
    “US Pressure on China Divides Industry,”                 Times (March 20, 2007). “[T]he World Trade                   the European Society of International Law).
    Financial Times (April 9, 2007).                         Organization system has so far done a good job
46 “China and India Will Shield GE from U.S.                 of holding protectionist sentiment in check.”
    Downturn, says Immelt,” Financial Times                  “Tight Rules are Keeping a Lid on Trade Wars.”
    (October 29, 2007).                                      Financial Times (June 5, 2005).




                                                                                                                                     Virginia Lawyer                    57

				
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