International Trade, WTO and China Human Rights

A few days after Secretary of State Hillary Clinton's hopeful and celebrated official visit to China, the U.S. State Department issued its annual report on China's human rights record.  In it, the U.S. criticises China for silencing dissent and oppressing ethnic minorities.  

Not to be outdone by the U.S., China hit back with its own Human Rights Record of the United States in 2008, enumerating a laundry list of rights violations committed by the United States government.

As a law student who wants to carve out a living by building a China-related law practice, I refuse to be drawn into this "p___ing contest."  However, that is not to say that human rights and law practice related to China are not related.  Quite on the contrary, I learned over the weekend that there is a correlation between the two.

During the UT International Law Journal China Law Symposium, Professor Patricia Hansen at the University of Texas Law School spoke about the connection between international trade, the WTO, and human rights, and the possible ramifications that this connection may have for China.  From a historical perspective, before China joined the WTO, the U.S. Congress had an annual review of China's human rights record in the 1990s, and thus a chance to publicly shame China before the Congress would grant China the coveted Most Favored Nation Status for the purpose of international trade.  In that sense, there was a direct correlation between China's behavior on human rights and carrots that the U.S. held on trade.  However, after China joined the WTO, the U.S., essentially, lost its only effective leverage to "whip" China into shape with respect to human rights because China did not agree nor did it commit to any provisions regarding human rights in its negotiations for the WTO membership.

Professor Hansen posits that the disconnect between international trade and human rights abuses/concerns extends beyond China.  Therefore, there should be an international solution that binds all players in international trade.  To reach that goal, Professor Hansen explained that trade policymakers have attempted the following two approaches: (1) weave human rights protection into the Doha Round; and (2) empower and implore the Appellate Body of the WTO to use human rights protection as a factor in deciding trade disputes.

However, problems exist for both approaches.  First, developing countries are unlikely to and have refused to agree to any kind of human rights protection provisions as envisioned by the developed countries because human rights is just another excuse for the latter to discriminate against the former and impose unreasonable demands.  Second, the Appellate Body of the WTO is fiercely textual in its application of the relevant law; and hence, absent textual authorization, it is unlikely to step beyond its commitment to the WTO agreements.  Given these hurdles, it seems that human rights protection and international trade do not really mesh well in the context of creating a binding obligation on trading nations in the WTO.

Professor Hansen does see hope on the horizon though in light of some incremental developments on this very subject.  First, international negotiations have resulted in a narrow exception to the strict prohibition of compulsory licensing of pharmaceutical technology (patents) by member countries.  Where there is a human health pandemic or disaster, member countries like Brazil and India are permitted to appropriate patents held by foreigners in order to protect the right to protect public health and access to medical treatment.  Second, in a  case regarding sea turtles decided by the WTo Appellate Body, the Court decided that laws implemented by the U.S. in protecting sea turtles to the detriment of other member countries are fully in compliance with the WTO rules and consistent with relevant WTO decisions.  Based on the above, access to medical treatment & the protection of public health as well the the protection seas turtle, both of which are beyond the traditional notions of human rights, might herald a new direction in linking trade with human rights protection.  [One might think that protecting human rights (however one interprets it) is arguably more important than the protection of endangered sea turtles even though it is also arguable that some sea turtles are more lovable than some humans.]

These developments led Professor Hansen to see the possibility that the Appellate Body might gradually read more human rights protection into trade disputes between nations where necessary and appropriate despite its strictly textual approach to interpreting the WTO rules.

I do think that human rights have a part to play in international trade and vice versa. Undoubtedly, China's entry to the WTO has resulted in dramatic changes in the Chinese society.  Millions of Chinese enjoy more material wealth, and the society has grown more open and integrated to the rest of the world.  More Chinese have the basic necessities to sustain their lives, and the government is growing more responsive to people's fundamental survival needs (public health, transportation in the countryside) (some might argue that this is not a result of the WTO, but I'd humbly submit that there is a connection.)

Because of the transformitive power of international trade to trading nations, human rights could certainly play a role in improving the lives of citizens of those nations.  However, in order to help developing nations stomach the idea of international standards on human rights, the following limitations might facilitate and/or accelerate the linking of the two:

1.  Integrate international customary law on human rights, rather than human rights standards set forth by the developed nations.  International customary law is already recognized and practiced by many nations, and it does not  impose additional, new obligations on developing nations. 

2. The WTO Appellate Body should require evidence of specific violations relevant to a trade dispute, rather than simply relying on allegations of general violations by a certain nation.  This requirement imposes a heavier burden of proof on the complaining nation, and it helps the Appellate Body to fashion appropriate and proportionate penalties for actual and specific violations of international human rights obligations. 

    

WTO Guru

On Tuesday (January 15, 2008), a special visitor spoke in my International Business Transactions class at SMU Law School. His background and speech are so interesting that they warrant a special post here.

Hon. James Bacchus was the guest speaker. If you haven’t heard of him, he served two terms on the appellate body of the WTO. The following is an excerpt of his bio:

He was a founding Member, and remains the longest-serving Member, of the highest global trade tribunal. He was twice appointed by consensus of the Members of the WTO, and was twice elected Chairman by his six colleagues. During his eight years of service to the WTO, he was the only American, and the only North American, on the Appellate Body.
…
His final decision for the WTO was as the presiding judge in the appeal in the complaint by the European Union, Japan, China, Brazil, and other WTO Members against a safeguard measure by the United States restricting imports of steel. Following the decision by the United States to comply with the ruling by Bacchus and his colleagues on the Appellate Body, The New York Times concluded that "this case was the rough equivalent of Marbury v. Madison, the 1803 decision that established the Supreme Court as the final arbiter of the constitution, able to force Congress and the executive branch to comply with its rulings." (Page 25, December 5, 2003). According to the American Lawyer, "James Bacchus, as much as anyone, can lay claim to being the John Marshall of the World Trade Organization." (March, 2004).

He commenced his lecture with a short pithy discussion on the relationship between trade and freedom. In his opinion, economic freedom generally precedes political freedom, and he stated that is why he supported granting China the “Most Favored Nation” trade status while he was representing Florida in the United State Congress. In his own words, “sooner or later, people are going to ask for political freedom.” Not to put words in his mouth, but a corollary of free trade is ultimate political freedom. (A highly disputed topic, which I won’t get into.)

Then, he posited that the WTO does not try to influence any sovereign nation’s politics, and that it has power over a certain nation only when the member country (countries) chooses to give such authority. In the WTO dispute resolution mechanism, there is no private right of action. In plain English, only member countries, not individual corporations in the countries, can sue. Thus, if a country does not agree to sue the company in another country, the grieved company is out of luck. Simply put, the WTO’s compulsory jurisdiction is only good when a sovereign nation complains about another country.

Further, he shed light on how a judge makes a decision on a WTO case. Generally, a judge undertakes a three-step process. First, she examines the defendant country’s WTO obligations in a certain area at bar, which are laid out in WTO accession agreements. For example, intellectual property obligations would be governed by the TRIPs agreements. Then, she explores the measures that the defendant country has taken to fulfill the WTO obligations. Third, she scrutinizes the facts and circumstances in their totality, and analyzes whether the defendant country’s measures indeed fulfill its compulsory WTO obligations. If a shortfall exists, the defendant country is “guilty,” and it will be required to adjust its measures accordingly. If it does not comply, penalties will follow in the form of withdrawn WTO benefits, i.e. higher tariffs. (Writing a WTO legal opinion is a totally different matter. Those opinions go for hundreds of pages, if you think the U.S. Supreme Court opinions are long. For example, Panel report out on Mexico-US anti-dumping dispute.)

Unlike the International Monetary Fund (IMF) or the World Bank, the WTO is not an independent legal entity. It cannot own real estate, nor can it enter into other business transactions.

During the Q & A session, questions about the U.S. WTO action against China regarding intellectual property was raised, but he did not go into details. I think it is because that he is a counsel (or maybe an advisor) of one of the involved parties.

Another point of interest is that he would like to see a WTO specific legal code of ethics for those attorneys practicing at the WTO, but he sees the difficulty of it ever coming into fruition, since that would be giving the WTO too much power.

He was thoroughly enjoyable and extremely knowledgeable about WTO-related matters. What a treat!

China and the WTO: Six Years of what?

It has been almost 6 years since China ascended into (or shall I say onto) the WTO. And what a six years it has been for China and the other member countries of the WTO! For optimists, the six years have been a period of remarkable progress in terms of regulatory reformation and unprecedented market access into China. A recent report brought forth by China Trade Gateway rings such an optimistic tone, yet with restrained hope for more reforms to be undertaken by China.

First off, the report shows some notable benefits that China has harvested from its entry into the WTO. Contrary to fears of many Chinese, foreign competition resulting from the WTO has increased domestic companies ability to survive an ever more competitive market. For example:

[T]he price of imported vehicles are getting lower but at the same time cars made in China are increasing their market share more, banking reforms are coming into place, the insurance sector is finally improving, the entertainment industries are opening up to the West, but also Chinese movies and music are targeting Western audiences.

Along the same line, many Chinese companies have “selectively adopted” Western practices, such as “management principles and customer service, which leads to a beneficial integration in companies, and in the long term into the consciousness of Chinese people.” I agree with this observation and believe the Chinese will catch up with some Western companies soon, adopting and adapting to skills, methods, and technologies brought by foreign firms.

Second, WTO member countries have also mutually benefited from China. Most obviously, improved market access means more opportunities to invest in sectors and industries previously inaccessible. Retail, franchising and other means of distribution have become bright spots for investment due to more friendly governmental regulations. In all, according to this report, “China has reviewed more than 2,000 trade related laws and regulations…and has abolished over 700 of them, amending others to bring the country into compliance.” As reflected in figures released by the World Bank, “the Chinese economy contributes to 13 percent of the world's economic growth.” Furthermore, the report cites that a total of “USD 57.94 billion was remitted out of China as profits” in a span of five years following China’s entry to the WTO. These are impressive figures and presumably rewarding profits.

Third, areas of outstanding concerns exist despite the mutually beneficial relationship between China and other member countries. Cited by the Europeans and the Americans, the following areas remain problematic and contentious:

China's enforcement, the transparency and consistency of Intellectual Rights Protection, the currency evaluation of the renminbi, existing trade barriers in China for agricultural products through Sanitary and Phytosanitary measures, continuous interferences of the state in certain industries, such as telecommunications and for example the steel industry, as well as recent import tariffs on foreign auto parts. On the other hand, China still faces protection from the US and European governments in industries they feel threatened by, leading to high anti-dumping cases.

Finally, looking beyond the haze of remaining issues, the author of the report sees promising opportunities ahead in many major industries and areas. Examples include banking & financial services sector, telecommunication, distribution and retail sectors, services as well as mergers and acquisitions.

The future sure looks good in the eyes of this report, does it? Read the full article here.