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Free Trade, Fair Trade, and Selective Enforcement
Timothy Meyer
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491
FREE TRADE, FAIR TRADE, AND SELECTIVE
ENFORCEMENT
Timothy Meyer
*
The 2016 presidential election was one of the most divisive in re-
cent memory, but it produced a surprising bipartisan consensus.
Donald Trump, Hillary Clinton, and Bernie Sanders all agreed that
U.S. trade agreements should be, but are not, “fair.” Although it
achieved broad consensus only recently, the critique that U.S. trade
agreements are unfair has been around for decades. Since 1992, much
of this fairness critique has focused on ensuring that trade liberaliza-
tion does not undermine noncommercial values, such as environmental
protection and labor conditions. Beginning with the negotiation and
ratification of the North American Free Trade Agreement (NAFTA) in
the early 1990s, governments have responded by including in their
trade agreements a prohibition on the selective enforcement of environ-
mental and labor laws. This ban—a central component of efforts to
make sure that free trade agreements are fair—aims to prevent a global
race to the bottom in environmental and labor standards.
These efforts have fallen wide of the mark. This Article makes two
novel contributions. First, it demonstrates empirically that selective en-
forcement is considerably more pervasive than commonly thought. But
contemporary selective enforcement is the reverse of the kind of selective
enforcement that has traditionally concerned trade critics. Instead of
selectively enforcing environmental and labor laws to gain a trade
advantage, governments selectively enforce trade laws in ways that
undermine environmental and labor interests. This Article presents
data from trade enforcement actions in the energy and fisheries sectors
to demonstrate this claim. In both sectors, trade laws are enforced exclu-
sively against natural resource substitutes, such as renewable energy
and farmed fish. The natural resources with which these products com-
pete, fossil fuels and wild fish, benefit from the same allegedly unlawful
conduct but are not targeted for enforcement.
Second, this Article presents a theory of how selective enforcement
of trade law distorts markets to the detriment of the environment. It
argues that selective enforcement is an implicit subsidy for products that
are not targeted for enforcement but benefit from the same allegedly
* Professor of Law, Vanderbilt University Law School. For helpful suggestions, I
thank Steve Charnovitz, Ed Cheng, James Coleman, Beverly Moran, Jim Rossi, Jeffrey
Schoenblum, Chris Serkin, Ingrid Wuerth, participants at the American Society of
International Law’s (ASIL) Research Forum, the ASIL International Economic Law
Interest Group Biannual Conference, and the International Energy Governance
Roundtable at Vanderbilt.
492 COLUMBIA LAW REVIEW [Vol. 118:491
unlawful conduct as targeted products. This Article presents evidence
that selective enforcement in the energy and fisheries sectors has indeed
caused these effects.
This Article concludes by suggesting how governments can reform
trade law enforcement to address the pernicious effects of selective
enforcement. Governments have acted to address other kinds of selective
enforcement in the past, so reform is politically feasible. Nevertheless,
given the current political climate, reforms should concentrate on
increasing trade law enforcement across the board.
I
NTRODUCTION ......................................................................................... 493
I. SELECTIVE ENFORCEMENT IN TRADE L AW........................ ... ..... .... .. ..... . 498
A. Selective Enforcement of Environmental and Labor Laws....... 499
B. Selective Enforcement Against Weak Countries........................ 502
II. SELECTIVE E NFORCEMENT OF TRADE LAWS.................................. ..... .. 505
A. Selective Enforcement in the Energy Sector ............................. 506
B. Sel ective Enforcement in the Fisheries Sector .......................... 517
III. HOW SELECTIVE ENFORCEMENT OF TRADE LAWS HURTS
ENVIRONMENTAL PRODUCTS ....... .. .... .. .... .. ... ...................................... 526
A. The Financial Costs of Selective Enforcement .................... ...... 526
1. Litigation Costs..................................................................... 527
2. Liability ................................................................................. 528
a. Withdrawn Government Support.................................. 528
b. Higher Duties on Natural Resource Substitutes........... 530
3. Lost Investment and Higher Costs of Capital ..................... 531
B. Wh at Kind of Relationship Between Products Makes Selective
Enforcement Pernicious?............................................................ 533
C. The Social Costs of Selective Enforcement................................ 536
IV. SELECTIVE ENFORCEMENT IN ENERGY AND FISHERIES.......................... 539
A. The Effects of Selective Enforcement in Energy ....................... 540
B. The Effects of Selective Enforcement in Fisheries .................... 548
V. REFORMING TRADE LAW ENFORCEMENT ............................................ 555
A. Reforming the WTO Enforcement Process............................... 556
B. Reforming Trade Remedy Investigations................................... 561
CONCLUSION ..................... .. ...................................................................... 564
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 493
INTRODUCTION
The 2016 presidential election was one of the most divisive in recent
memory, but it produced a surprising bipartisan consensus: U.S. trade
agreements should be, but are not, “fair.” Shortly after taking office,
Republican President Donald Trump told Congress, “I believe strongly in
free trade, but it also has to be fair trade.”
1
During the Democratic pri-
mary, Senator Bernie Sanders arg ued for “fair trade which works for the
middle class and working families.”
2
By the general election, Democratic
candidate Hillary Clinton, who initially supported many existing U.S.
trade agreements, also embraced “smart and fair trade” as a criticism of
existing U.S. policies.
3
The notion of “fair” trade implies that trade
agreements should protect values other than pure trade liberalization.
But which values must be protected in order for trade to be “fair”?
Since 1992, much of the fairness critique of U.S. trade agreements
has focused on ensuring that free trade does not undermine environ-
mental and labor standards in developed and developing countries
alike.
4
Beginning with the negotiation and ratification of the North
American Free Trade Agreement (NAFTA) in the early 1990s,
5
critics
have worried that reducing trade barriers will cause companies to
relocate production facilities to countries with lower environmental and
labor standards.
6
This dynamic would, in turn, pressure countries to
lower their environmental and labor standards in orde r to keep or attract
jobs.
7
To prevent this race to the bottom, the NAFTA parties agreed on
1. Donald J. Trump, Remarks by President Trump in Joint Address to Congress (Feb. 28,
2017), http://www.whitehouse.gov/the-press-office/2017/02/28/remarks-president-trump-
joint-address-con gres s [http://perma.cc/YMF9-7NLJ].
2. Bernie Sanders on Free Trade, OnTheIssues.org, http://www.ontheissues.org/
2016/Bernie_Sanders_Free_Trade.htm [http://perma.cc/QJ2S-2R93] (last updated Aug.
18, 2016).
3. Jare d Bernstein, Hillary Clinton Calls for ‘Smart and Fair Trade.’ What Is That?,
Wash. Post (Oct. 3, 2016), http://www.washingtonpost.com/posteverything/wp/2016/10/
03/hillary-clinton-calls-for-smart-fair-trade-what-is-that/?utm_term=.9c508926d19a (on file
with the Columbia Law Review).
4. See Timothy Meyer, Saving the Political Consensus in Favor of Free Trade, 70 Vand.
L. Rev. 985, 1002–08 (2017) [hereinafter Meyer, Saving the Political Consensus] (recounting
the history of labor and environmental chapters in trade agreements).
5. North American Free Trade Agreement, Can.-Mex.-U.S., Dec. 17, 1992, 32 I.L.M.
289 (1993).
6. Douglas Seay & Wesley Smith, Why the Governors Support the NAFTA (and
Washington Doesn’t), Heritage Found. (June 15, 1993), http://www.heritage.org/research/
reports/1993/06/bg946nbsp-why-the-governors-support-the- nafta [http://perma.cc/U76B-
BCGB] (discussing NAFTA’s opponents’ strategy of “portray[ing] the NAFTA as leading to a
massive loss of jobs, the de-industrialization of the U.S., and a lowering of labor and
environmental standards to those of the Third World”).
7. See Anthony DePalma, Law Protects Mexico’s Workers but Its Enforcement Is
Often Lax, N.Y. Times (Aug. 15, 1993), http://www.nytimes.com/1993/08/15/world/law-
protects-mexico-s-workers-but-its-enforcement-is-often-lax.html?pagewanted=all (on file with
494 COLUMBIA LAW REVIEW [Vol. 118:491
rules prohibiting the selective enforcement of labor and environmental
laws.
8
This ban on selective enforcement soon became standard in trade
agreements worldwide and a central component of efforts to make sure
that free trade agreements could, indeed, be fair.
9
These efforts have fallen wide of the mark. This Article makes two
novel contributions. First, focusing on the environmental context, it de-
monstrates empirically that selective enforcement in trade law today is
pervasive. But contemporary selective enforcement is the reverse of the
kind of selective enforcement that has traditionally worried trade critics.
Instead of selectively enforcing environmental laws to gain a trade ad-
vantage, governments selectively enforce trade laws in ways that hurt
environmental interests. Second, this Article argues that this new kind of
selective enforcement slows the development of competitive environ-
mentally and labor-friendly products. In effect, selective enforcement of
trade law acts as an implicit subsidy for products with large social costs—
the epitome of an “unfair” trade practice.
To illustrate these two arguments, this Article evaluates how gov-
ernments enforce rules that limit government subsidies and other forms
of government financial support for industries against, on the one hand,
programs benefitting natural resources (such as fossil fuels) and, on the
other hand, against programs benefitting their substitutes (such as
renewable energy).
10
I define selective enforcement in the commercial
the Columbia Law Review) (discussing “concerns that American workers would lose jobs
and receive lower wages under [NAFTA]”).
8. North American Agreement on Environmental Cooperation, Can.-Mex.-U.S., art.
5, Sept. 8–14, 1993, 32 I.L.M. 1482 [hereinafter NAFTA Environmental Side Agreement]
(“[E]ach Party shall effectively enforce its environmental laws and regulations through ap-
propriate governmental action . . . .”); North American Agreement on Labor Cooperation,
Can.-Mex.-U.S., art. 3, Sept. 8–14, 1993, 32 I.L.M. 1502 [hereinafter NAFTA Labor Side
Agreement] (“Each Party shall promote compliance with and effectively enforce its labor
law . . . .”).
9. See Cathleen Cimino-Isaacs, Labor Standards in the TPP, in Trans-Pacific
Partnership: An Assessment 261, 265–66 (Cathleen Cimino-Isaacs & Jeffrey J. Schott eds.,
2016) (discussing the evolution of labor provisions in U.S. free trade agreements ); Meyer,
Saving the Political Consensus, supra note 4, at 1003–04 (discussing the negotiation and
adoption of NAFTA side agreements, which “required the NAFTA parties to enforce their
existing labor and environmental laws” and authorized “monetary fines if a country failed
‘to effectively enforce its occupational safety and health, child labor or minimum wage
technical standards’” (quoting NAFTA Labor Side Agreement, supra note 8, art. 39)).
10. Trade rules include a definition of a “subsidy” that is narrower than the
colloquial meaning of the term and that does not capture all forms of government
financial support. See Agreement on Subsidies and Countervailing Measures art. 1, Apr.
15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A,
1869 U.N.T.S. 14 [hereinafter SCM Agreement]. Governments, however, can and do use a
broad range of trade rules to challenge government financial support that might not
technically count as a subsidy under trade rules. See infra Part II. Except for where this
Article discusses the SCM Agreement itself, it uses the term “subsidies” in the colloquial
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 495
context as the systematic enforcement of laws against some producers
but not others that (1) compete with the targets of enforcement and (2)
engage in or benefit from the same allegedly unlawful conduct. (I refer
to producers that meet these criteria as “similarly situated.”) The energy
sector provides the most glaring example of this phenomenon. Govern-
ment financial support for fossil fuels is about seven ti mes larger than
support for renewable energy: $934 billion to $135 billion in 2014.
11
Yet
in the last eight years, governments and the World Trade Organization
(WTO) have, within the energy sector, cracked down exclusively on ef-
forts to support renewable energy.
Since 2008, governments have launched over 20 domestic trade
investigations and WTO challenges to other nations’ renewable energy
support programs,
12
disrupting investment in the renewable energy sec-
tor. Indeed, as this Article goes to print, President Trump has just
imposed thirty percent “safeguard” tariffs on solar cells imported into
the United States, a move some estimate could divert investment away
from solar energy and jeopardize 23,000 jobs in the renewable energy
sector.
13
Ontario canceled the largest part of its renewable energy Feed-
in Tariff Program, which paid preferential rates to electricity generators
that relied on renewable sources, following an adverse WTO ruling.
14
Argentina initially saw its biofuels industry dry up after the European
Union imposed antidumping duties that effectively closed the European
market to Argentinian biofuel producers.
15
Governments have
sense of “government financial assistance,” rather than its technical meaning under the
SCM Agreement.
11. See infra notes 286–293 and accompanying text.
12. See infra Part IV.
13. Press Release, Office of the U.S. Trade Representative, President Trump Approves
Relief for U.S. Washing Machine and Solar Cell Manufacturers (Jan. 22, 2018),
http://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/january/president-
trump-approves-relief-us [http://perma.cc/ 9D9Y-MVRQ]; Oliver Milman, Trump’s Tariffs on
Panels Will Cost US Solar Industry Thousands of Jobs, Guardian (Jan. 24, 2018),
http://www.theguardian.com/environment/2018/jan/23/donald-trump-tariffs-solar-panels
[http://perma.cc/DZ 9J-JKHJ] (citing the Solar Energy Industries Association’s figure for
potentia l job loss).
14. See infra notes 109–111 and accompanying text; see also Appellate Body Report,
Canada—Certain Measures Affecting the Renewable Energy Generation Sector, para. 6,
WTO Doc. WT/DS412/AB/R (adopted May 6, 2013) [hereinafter Canada—Renewables
Appellate Body Report]; Appellate Body Report, Canada—Measures Relating to the Feed-
in Tariff Program, para. 6, WTO Doc. WT/DS426/AB/R (adopted May 6, 2013)
[hereinafter Canada—Feed-in Tariff Program]; Paul Gipe, Two Steps Forward, One Back:
Ontario Cancels Feed-in Tariffs for Large Projects, Renewable Energy World (June 10, 2013),
http://www.renewableenergyworld.com/articles/ 2013/06/two-steps-for ward -one-back-ontario-
cancels-feed-in-tariffs-for-large-projects.html [http://perma.cc/F7Lz-PW5U].
15. See Council Implementing Regulation (EU) 1194/2013 of 19 Nov. 2013, Imposing a
Definitive Anti-Dumping Duty and Collecting Definitively the Provisional Duty Imposed on
Imports of Biodiesel Originating in Argentina and Indones ia, 2013 O.J. (L 315) 2, 8 (imposing
duties on Argentinian and Indonesion biod iesel); En Argentina Cae 40 % la Producción de
496 COLUMBIA LAW REVIEW [Vol. 118:491
challenged their trade partners’ support for renewable energy despite
the fact that the industry offers the pr omise of environmentally
sustainable growth in energy to meet the needs of both industrialized
countries and the developing world.
By contrast, no WTO member has ever initiated proceedings directly
targeting government support for domestic fossil fuel industries. This
contrast is both puzzling and troubling. Subsidies for fossil fuel consump-
tion lower the cost of energy to consumers. Lower costs incentivize en -
ergy-intensive industries like steel production to relocate to countries
with fossil fuel subsidies, which disadvantages the countries from which
those industries flee.
16
Moreover, fossil fuel subsidies run counter to
global carbon reduction objectives. In 2012, Faith Birol, then the chief
economist for the International Energy Agency (and now its head), esti-
mated that removing subsidies for coal, oil, and natural gas could pro-
duce half of the greenhouse gas emissions reductions necessary to keep
global temperatures from r ising more than two degrees Celsius above
preindustrial levels,
17
the limit to which nations have agreed.
18
Hence,
the logic of both liberalized trade and environmental protection suggests
we should see challenges to fossil fuel subsidies.
When natural resource substitutes such as renewable energy are
more likely to be targeted for enforcement, they suffer a competitive dis-
advantage.
19
Governments may withdraw support to avoid retaliation by
Biodiesel [Biofuel Production Falls 40% in Argentina], Biodiesel Argentina Noticias Sobre
Biodiesel y Energias Renovables (May 14, 2013), http://biodiesel.com.ar/7278/en-argentina-
cae-40-la-produccion-de-biodiesel [http://perma.cc/39GR-H7K5] [hereinafter Biodiesel
Argentina Noticias].
16. Why governments have not used trade rules to challenge fossil fuel subsidies is
beyond the scope of this Article, but several recent articles have addressed this question.
See Dirk De Bièvre, Ilaria Espa & Arlo Poletti, No Iceberg in Sight: On the Absence of
WTO Disputes Challenging Fossil Fuel Subsidies, 17 Int’l Envtl. Agreements 411, 413
(2017); Timothy Meyer, Explaining Energy Disputes at the World Trade Organization, 17
Int’l Envtl. Agreements 391, 393 (2017) [hereinafter Meyer, Explaining Energy Disputes].
17. Duncan Clark, Phasing Out Fossil Fuel Subsidies ‘Could Provide Half of Global
Carbon Target,’ Guardian (Jan. 19, 2012), http://www.theguardian.com/environment/
2012/jan/19/fossil-fuel-subsidies-carbon-target [http://perma.cc/9W42-RM2B]. A 2015
study from the Nordic Council of Ministers and the International Institute for Sustainable
Development estimated that removing just consumption subsidies for fossil fuels could
reduce greenhouse gas emissions by somewhere between 6% and 13%. Laura Merrill,
Melissa Harris, Liesbeth Casier & Andrea M. Bassi, Glob. Subsidies Initiative, Int’l Inst. for
Sustainable Dev., Fossil-Fuel Subsidies and Climate Change: Options for Policy-makers
Within Their Intended Nationally Determined Contributions 7 (2015), http://norden.diva-
portal.org/smash/get/diva2:786861/FULLTEXT02.pdf [http://perma.cc/9TKN-TFSY].
18. See Paris Agreement on Climate Change art. 2, Dec. 12, 2015, T.I.A.S. No. 16-
1104 (entered into force Nov. 4, 2016) (noting nations’ agreement to hold global
temperature increases to “well below 2°C above pre-industrial levels”).
19. See infra Part IV.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 497
other nations, as they have in the renewable energy sector.
20
Investment
in the sector may be withdrawn as investors seek higher returns else-
where, dampening development and innovation. Natural resource substi-
tutes may face higher import duties.
21
Companies producing natural
resource substitutes incur financial costs in defending themselves.
22
Taken together, these costs allow natural resources to sell at a discount
relative to their substitutes, which boosts natural resource consumption.
Selective enforcement is, in other words, a subsidy for natural resource
consumption.
23
This Article proceeds in five parts. Part I provides a historical ac-
count of the concern with selective enforcement in trade law. Govern-
ments and scholars have identified and taken steps to address several
kinds of selective enforcement, including the selective enforcement of
national environmental and labor laws
24
and the disproportionate en-
forcement of trade obligations against weak states.
25
These efforts
demonstrate that efforts to reform selective enforcement can appeal to
governments, provided they are aware of the selective enforcement in
the first place.
Part II provides the first empirical account of selective enforcement
of trade laws in ways that harm environmental interests, with special
focus on the energy and fisheries sectors. In both of these markets,
natural resources compete with natural resource substitutes. And in both
of these markets, there are strong environmental reasons to slow the con-
sumption of the natural resource (fossil fuels or wild caught fish). Yet in
both, governments around the world provide significant financial sup-
port to encourage development and consumption of the natural
resource. In both cases, government supports for natural resource subs t i-
tutes (renewable energy and aquaculture) are considerably more likely to
be targeted for enforcement than similar measures supporting the natu-
ral resources themselves. The presence of selective enforcement in these
two sectors suggests a broader pattern in which trade enforcement sys-
tematically disadvantages environmentally sustainable products.
Part III offers a theoretical explanation for how selective enforce-
ment in a commercial context ca n distort competition among products.
The central insight is that selective enforcement acts as an implicit sub-
sidy, imposing costs on some products but not other similarly situated
products. These costs come in at least three forms: litigation costs, liabil-
ity, and increased costs of capital. These costs limit the targeted product’s
20. See infra section III.A.2.a.
21. See infra section III.A.2.b.
22. See infra section III.A.1.
23. See infra section III.C.
24. See infra section I.A.
25. See infra section I.B.
498 COLUMBIA LAW REVIEW [Vol. 118:491
ability to compete in the marketplace and may slow the investment in
innovation necessary to make environmentally friendly products compet-
itive in the marketplace. In the environmental context, the effect of this
selective enforcement is to reinforce the market position of natural
resource–intensive industries. These industries create significant negative
externalities in th e form of environmental degradation. The effect of
selective enforcement in the natural resource context is thus the reverse
of what law and economics scholars have long called for: Selective en-
forcement subsidizes products with large social costs at the expense of
products with large social benefits.
Part IV moves from the general to the specific, providing evidence of
how selective enforcement in the energy and fisheries sectors does
indeed protect fossil fuels and wild fisheries from competition with envi-
ronmentally sustainable alternatives. Part V argues that ongoing efforts to
renegotiate trade agreements to make them fair should include measures
that limit selective enforcement of trade laws in order to ensure that
similarly situated products are regulated in the same fashion. WTO
members should consider creating an administrative enforcement pro-
cess as an adjunct to the WTO’s dispute-focused method of regulation.
The administrative process would identify any products that compete
with products at issue in formal WTO disputes and prima facie benefit
from the same kind of unlawful conduct. A weak version of this adminis-
trative process would involve the distribution of the list of such products
to member states and inclusion of the list for discussion at WTO meet-
ings. A stronger version would allow the WTO Secretariat or a new pros-
ecutorial office to bring a claim against nations maintai ning identified
measures. Past efforts to address other forms of selective enforcement
suggest that at least the weak version of selective enforcement is politi-
cally feasible.
I.
SELECTIVE E NFORCEMENT IN TRADE LAW
Virtually all laws are underenforced. Governments typically lack the
resources to pursue all violators, and it is by no means obvious that striv-
ing for perfect enforcement would make sense.
26
For instance, pursuing
all violators may not be justified from a cost–benefit perspective.
27
For
these reasons, governments have discretion in choosing the violators
26. See Kevin M. Stack & Michael P. Vandenbergh, The One Percent Problem, 111
Colum. L. Rev. 1385, 1393 (2011) (“For decision makers, whether private businesses or
government regulators, it is often more efficient to focus on the most significant
contributors to a problem.”).
27. Id. at 1393–94 (“Given economies of scale, it is often the case that with small-
percentage contributors the costs of regulation exceed the benefits. As a result, a focus on
high-percentage factors often concentrates effort and resources on the sources that may
make the most difference at the least expense.”).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 499
against whom they will enforce the law. In the criminal context, prosecu-
tors may choose to prioritize going after the perpetrators of particularly
heinous crimes.
28
In the environmental context, regulators may choose
to pursue the largest polluters in order to achieve the greatest environ-
mental benefit.
29
Selective enforcement, at least here, does not refer to this ordinary
exercise of prosecutorial discretion, nor does it refer to random variation
in how the laws are enforced. Instead, this Article defines selective
enforcement as the systematic imposition of the law against one class of
actors but not another that is similarly situated. For purposes of this defi-
nition, two actors are similarly situated if (1) they compete with each
other in the marketplace and (2) both engage in or benefit from the
unlawful practice to similar degrees. Selective enforcement of this kind
suggests that prosecutorial discretion is being exercised for reasons other
than merely ensuring compliance with the law. Once selective enforce-
ment has been demonstrated, the question becomes whether its causes
or effects can justify targeting only some legal subjects.
30
Trade lawyers have worried about at least two kinds of selective en-
forcement. First, they have worried about countries’ selectively enforcing
their own national environmental and labor laws in order to attract busi-
nesses.
31
Second, they have worried that WTO dispute resolution may
result in selective enforcement of WTO rules against weak countries but
not strong countries.
32
This Part addresses these forms of selective en-
forcement in turn.
A. Selective Enforcement of Environmental and Labor Laws
The early 1990s marked a new period for trade liberalization. Until
that point, parties to the General Agreement on Tariffs and Trade
(GATT) had engaged in “rounds” of trade negotiations that typically
28. See Richard S. Frase, The Decision to File Federal Criminal Charges: A
Quantitative Study of Prosecutorial Discretion, 47 U. Chi. L. Rev. 246, 303 (1980)
(concluding that the “prosecutorial discretion of the U.S. attorney is vast and unchecked
by any formal, external constraints or regulatory mechanisms”).
29. See Stack & Vandenbergh, supra note 26, at 1393–94.
30. Cf. Shoba Sivaprasad Wadhia, The History of Prosecutorial Discretion in
Immigration Law, 64 Am. U. L. Rev. 1285, 1288–89 (2015) (discussing the Obama
Administration’s decisions to prioritize the enforcement of immigration laws against
certain classes of illegal immigrants); P.S. Kane, Comment, Why Have You Singled Me
Out? The Use of Prosecutorial Discretion for Selective Prosecution, 67 Tul. L. Rev. 2293,
2300–01 (1993) (discussing empirical evidence that demonstrates that prosecutorial
discretion can result in discriminatory behavior).
31. See infra section I.A.
32. See infra section I.B.
500 COLUMBIA LAW REVIEW [Vol. 118:491
lasted a number of years.
33
Most of these rounds focused on reducing
tariff ra t es among members.
34
In the early 1990s, nations took two dra-
matic steps to increase economic integration. First, they created the
WTO. The WTO increased economic integration by expanding tra de
rules to cover trade in services and intellectual property, elaborating
rules on nontariff barriers, creating a functioning dispute resolution sys-
tem and ultimately paving the way for major economies such as China to
join.
35
Second, nations began to create free trade agreements (FTAs) and
customs unions, both of which require countries to abolish “substantially
all” trade barriers between members.
36
Notable FTAs and customs unions
created in the early 1990s include NAFTA;
37
the Treaty of Asunción,
which created Mercosur in South America;
38
and the Treaty of
Maastricht, whic h deepened European integration to form the modern
European Union.
39
This dramatic removal of trade barriers—especially between devel-
oped and developing countries—allowed companies to locate their pro-
duction facilities in countries in which they could most cheaply produce
their goods.
40
Government policies, in turn, can be the key determinant
of a firm’s costs of production. Environmental regulation, labor laws, and
taxes all increase production costs.
In the presence of relatively high trade barriers, countries did not
necessarily need to compete over these domestic policies. High tariffs,
for example, may prevent a company from moving its production over-
seas, even if production costs are lower there by virtue of different gov-
ernment policies.
41
The removal of trade barriers, however, incentivizes
33. Dani Rodrik, The Globalization Paradox: Democracy and the Future of the
World Economy 71 (2011).
34. See Chad P. Bown, Self-Enforcing Trade: Developing Countries and WTO
Dispute Settlement 11–14 (2009) (providing a history of the GATT negotiating rounds).
In the Tokyo Round in the 1970s, governments took up the issue of nontariff barriers,
while the subsequent Uruguay Round concluded with the negotiation of the WTO
Agreements. Id. at 13 tbl.1-2.
35. See id.; see also Marrakesh Agreement Establishing the World Trade
Organization, Apr. 15, 1994, 1867 U.N.T.S. 154.
36. General Agreement on Tariffs and Trade art. XXIV.8, Oct. 30, 1947, 61 Stat. A-
11, 55 U.N.T.S. 194 [hereinafter GATT].
37. North American Free Trade Agreement, supra note 5.
38. Treaty Establishing a Common Market art. 1, Mar. 26, 1991, 30 I.L.M. 1041.
39. Treaty on European Union, Feb. 7, 1992, 1992 O.J. (C 191) 1.
40. Transportation costs are also a constraint on offshoring, although a declining one
and not necessarily meaningful between neighbors like the United States and Mexico.
Robert C. Feenstra, Integration of Trade and Disintegration of Production in the Global
Economy, 12 J. Econ. Persp. 31, 34 (1998) (estimating how much trade growth stems from
trade liberalization versus falling transportation costs).
41. See Rodrik, supra note 33, at 20 (noting that “government-imposed tariffs . . .
constitute clear transaction costs on international exchanges”).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 501
countries to reduce their domestic regulatory standards in order to at -
tract business.
42
Partially to counteract these incentives, governments have agreed on
minimum standards in a wide range of areas. For example, nations have
adopted a range of international labor standards in treaties negotiated
under the auspices of the International Labour Organization (ILO).
43
They have also agreed to a variety of environmental treaties, such as the
Montreal Protocol on Substances that Deplete the Ozone Layer.
44
Institu-
tions like the Basel Committee have sought to impose common standards
in financial regulation.
45
Yet the mere existence of these international standards, or even
their commitment to domestic law, does not ensure enforcement. Each
time the United States has negotiated a major free trade agreement with
a developing country, environmental and labor interests have expressed
concern that the country will not effectively enforce its laws, preferring
the trade advantage that comes with lower de facto stand ards. For
instance, when he first sought authority to negotiate NAFTA, President
George H.W. Bush told Congress that “Mexico’s labor standards are
comparable to those in the United States . . . .”
46
During the 1992
presidential campaign, however, then-Governor Bill Clinton charged that
NAFTA did “nothing to reaffirm our right to insist that the Mexicans fol-
low their own labor standards, now frequently violated.”
47
Fair environ-
mental and labor standards meant not only th e law on the books, but
also whether and how that law was enforced.
After he became President, Clinton took steps to address this form
of selective enforcement. He negotiated what is known as the NAFTA
Side Agreements (or, more formally, the North American Agreements
42. See Lawrence Summers, A Strategy to Promote Healthy Globalization, Fin. Times
(May 4, 2008), http://www.ft.com/content/999160e6-1a03-11dd-ba02-0000779fd2ac (on
file with the Columbia Law Review) (arguing that “the mantra of needing to be
‘internationally competitive’ has been invoked too often as a reason to cut back on
regulation” in the financial and labor sectors).
43. See Labour Standards, Int’l Labour Org., http://www.ilo.org/global/ standards/lang–
en/index.htm [http://perma.cc/6FBP-KAAE] (last visited Oct. 10, 2017) (describing the ILO’s
instruments and associated labor standards).
44. Montreal Protocol on Substances that Deplete the Ozone Layer, Sept. 16, 1987,
1522 U.N.T.S. 3.
45. See Chris Brummer, Minilateralism: How Trade Alliance s, Soft Law, and
Financial Engineer in g Are Re defining Economic Statecraft 99–100 (2014).
46. Jerome I. Levinson, World Policy Inst., Unrequited Toil: Denial of Labor Rights
in Mexico and Implications for NAFTA 2 (1993).
47. Jerome I. Levinson, Econ. Policy Inst., The Labor Side Accord to the North
American Free Trade Agreement: An Endorsement of Abuse of Worker Rights in Mexico 1
(1993), http://www.iatp.org/files/Labor_Side_Accord_to_th e_North_American_Free_T.pdf
[http://perma.cc/Z485-J9SG] (internal quotation marks omitted).
502 COLUMBIA LAW REVIEW [Vol. 118:491
on Environmental and Labor Cooperation) to address these concerns.
48
The agreements require that NAFTA parties “effectively enforce [domes-
tic] environmental laws and regulations through appropriate govern-
mental action”
49
and “promote compliance with and effectively enforce
[domestic] labor law,”
50
respectively. These commitments remain,
however, subject to ordinary exercises of prosecutorial discretion in the
face of limited resources.
51
Partially as a consequence, concerns about
selective enforcement of environmental and labor laws have persisted to
the current day. During negotiations on the Trans-Pacific Partnership,
for instance, critics expressed doubts that countries like Vietnam or
Mexico would comply with the heightened environmental and labor
standards contained in that agreement.
52
B. Selective Enforcement Against Weak Countries
Over the last ten or so years, some scholars have suggested that
international trade law suffers from a second kind of selective enforce-
ment. They have argued that trade rules tend to be enforced more often
than one would expect against weak countries (those with relatively small
economies) and less often than one would expect against powerful
countries (those with major economies).
53
To understand the root of this
48. NAFTA Environmental Side Agreement, supra note 8; NAFTA Labor Side
Agreement, supra note 8.
49. NAFTA Environmental Side Agreement, supra note 8, art. 5.
50. NAFTA Labor Side Agreement, supra note 8, art. 3.
51. See NAFTA Environmental Side Agreement, supra note 8, art. 45 (“A Party has
not failed to ‘effectively enforce its environmental law’ . . . where the action or inaction . . .
by agencies or officials . . . reflects a reasonable exercise of their discretion.”); NAFTA
Labor Side Agreement, supra note 8, art. 49 (“A Party has not failed to ‘effectively enforce
its . . . labor standards’ . . . where the action or inaction by agencies or officials . . . reflects
reasonable exercise of . . . discretion.”).
52. Alana Semuels, The TPP’s Uneven Attempt at Labor Protection, Atlantic (Jan. 22, 2016),
http://www.theatlantic.com/business/archive/2016/01/tpp-mexico-labor-rights/426501/
[http://perma.cc/HZ9N-E5Z2] (citing John Sifton, Human Rights Watch’s Asia advocacy
director, as sayin g “[c]ountries such as Vietnam would have to completely revolutionize their
legal systems to comply with the labor-union requirements, which doesn’t seem likely”).
53. See, e.g., Chad P. Bown, Participation in WTO Dispute Settlement: Complainants,
Interested Parties, and Free Riders, 19 World Bank Econ. Rev. 287, 287–88 (2005)
[hereinafter Bown, WTO Dispute Settlement] (showing that a country’s retaliatory and
local capacities affect whether it chooses to settle trade disputes); Chad P. Bown, Trade
Disputes and the Implementation of Protection Under the GATT: An Empirical
Assessment, 62 J. Int’l Econ. 263, 292 (2004) (finding that GATT parties are more likely to
implement unlawful protectionist policies when the target country lacks the capacity to
retaliate). But see Andrew T. Guzman & Beth A. Simmons, Power Plays and Capacity
Constraints: The Selection of Defendants in World Trade Organization Disputes, 34 J.
Leg. Stud. 557, 558–59 (2005) (finding that weak countries do not avoid bringing WTO
disputes against powerful countries but are constrained in the number of cases they can
file); Henrik Horn, Petros C. Mavroidis & Håkan Nordström, Is the Use of the WTO Dispute
Settlement System Biased? 2 (Ctr. for Econ. Policy Research, Discussion Paper No. 2340, 1999),
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 503
concern, consider how the WTO structures dispute settlement. Neither
the WTO nor any other centralized body enforces WTO rules against
member states. Instead, under WTO rules, states initiate trade disputes
against each other.
54
In this sense, states act as private attorneys general,
bringing actions on their own to enforce obligations created by treaty.
55
But if a complainant prevails on its claim, it does not win compensatory
damages.
56
Instead, it wins the right to impose retaliatory sanctions if the
losing party does not comply with its trade obligations.
57
The lack of a
centralized enforcement system means that the WTO regime—a body of
multilateral, public laws—is enforced as a series of bilateral arrangements
through the use of self-help.
Given this arrangement, weak countries might reasonably fear that
they will not be able to enforce a victory because any retaliatory trade
measures they are able to impose will have a negligible effect on the
more powerful state. For instance, in 2005, Antigua won a WTO dispute
against the United States after the latter banned online gambling services
from overseas.
58
To date, the United States has not complied with the
ruling.
59
Antigua, fo r its part, is not a major destination for U.S. products
or services and can do little to punish the United States for its continued
failure to comply with the law.
http://cepr.org/active/publicat ions/discuss ion_papers/dp.php?dpno=2340# (on file with the
Columbia Law Review) (arguing that the evidence does not support a conclusion of bias in the
WTO dispute settlement system).
54. Understanding on Rules and Procedures Governing the Settlement of Disputes
art. 6.1, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization,
Annex 2, 1869 U.N.T.S. 401 [hereinafter DSU] (“If the complaining party so requests, a
panel shall be established . . . .”).
55. Alternatively, one can think of the WTO treaties as contracts among nations,
which bring private actions to enforce their contractual rights.
56. See DSU, supra note 54, art. 22.1 (providing that “[c]ompensation is voluntary”).
57. See DSU, supra note 54, art. 22.2 (“[W]ithin 20 days after the date of expiry of
the reasonable period of time, any party having invoked the dispute settlement procedures
may request authorization from the [Dispute Settlement Body] to suspend the application
to the Member concerned of concessions or other obligations under the covered
agreements.”).
58. See Appellate Body Report, United States—Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, para. 373, WTO Doc. WT/DS285/AB/R
(adopted Apr. 7, 2005) (finding that U.S. laws prohibiting internet gambling while
permitting in-person gambling violate the General Agreement on Trade in Services).
59. See Panel Report, United States—Measures Affecting the Cross-Border Supply of
Gambling and Betting Services, Recourse to Article 21.5 of the DSU by Antigua and
Barbuda, para. 7.1, WTO Doc. WT/DS285/RW (Mar. 30, 2007) (“[T]he Panel concludes
that the United States has failed to comply with the recommendations and rulings of the
[Dispute Settlement Body] in this dispute.”).
504 COLUMBIA LAW REVIEW [Vol. 118:491
Weak states might also lack the capacity to bring WTO disputes in
the first place.
60
They may not have, for example, a large governmental
legal office specializing in international trade, as the United States or the
European Union has.
61
They also may not be able to afford the substan-
tial financial costs of bringing a WTO dispute, or the political and
diplomatic costs of dealing with an upset trading partner.
62
Such a pattern of enforcement raises concerns about fairness and
distributive justice. Weak defendants may be targeted for enforcement
because they lack counsel, the resources to obtain it, or the ability to
defend themselves. Powerful states, for their part, avoid being named as
defendants because prevailing against them is expensive and sanctioning
them to induce compliance is even more costly. Thus, the legal system
does not treat like conduct alike. And the resulting case law reflects the
interests of strong, repeat players, not the interests of weak, infrequent
litigants.
63
Just as with selective enforcement of national environmental and
labor laws, governments (and the WTO itself) have taken steps to ame-
liorate the effects of selective enforcement against weak states. These
steps have primarily focused on capacity building so that developing
states in particular can draw on legal expertise to help them defend or
even bring WTO disputes. For instance, WTO rules require the WTO
Secretariat to conduct training for governments on how the dispute reso-
lution process works and to provide a legal expert to developing coun-
tries to assist them.
64
Perhaps most importantly, a number of WTO mem-
bers created the Advisory Centre on WTO Law, which is tasked with
“provid[ing] legal training, support and advice on WTO law and dispute
60. See Marc L. Busch, Eric Reinhardt & Gregory Shaffer, Does Legal Capacity
Matter? A Survey of WTO Members, 8 World Trade Rev. 559, 563–66 (2009) (surveying
the staffing and resource decisions of WTO members to assess their capacity to participate
in WTO dispute settlement); see also Bown, WTO Dispute Settlement, supra note 53, at
287–88; Guzman & Simmons, supra note 53, at 558–59.
61. Cf. Guzman & Simmons, supra note 53, at 566 (“States that commit more people
to trade issues and have more qualified individuals working in the area, more mature and
sophisticated institutions to handle trade matters, and more financial resources to address
trade disputes are higher capacity states.”); Horn, Mavroidis & Nordström, supra note 53,
at 2 (“[W]e find no evidence that large countries target small countries dis-
proportionately, or that small countries bring fewer complaints against large countries
than expected.”).
62. See Bown, WTO Dispute Settlement, supra note 53, at 308 (presenting empirical
evidence that a country is less likely to participate in WTO litigation “if it has inadequate
power for trade retaliation, if it is poor and does not have the capacity to absorb
substantial legal costs, [or] if it is particularly reliant on the respondent country”).
63. See Catherine Albiston, The Rule of Law and the Litigation Process: The Paradox
of Losing by Winning, 33 Law & Soc’y Rev. 869, 869 (1999) (expanding on the idea that
“repeat players influence the development of law by settling cases they are likely to lose
and litigating cases they are likely to win”).
64. DSU, supra note 54, art. 27.2–27.3.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 505
settlement procedures to developing countries . . . and to countries with
economies in transition.”
65
* * *
Selective enforcement has thus been a persistent concern for gov-
ernments and trade lawyers. Nations have repeatedly come together to
address selective enforcement that undermines the fairness and legiti-
macy of trade law. They have renegotiated trade agreements like NAFTA
to respond to selective-enforcement concerns and devoted resources to
ameliorating selective enforcement’s effects. Yet governmental efforts
have fallen short, in part because of a blind spot about other kinds of
rampant selective enforcement.
II.
SELECTIVE ENFORCEMENT OF TRADE LAWS
This Part provides empirical evidence of a heretofore unremarked-
upon kind of selective enforcement in trade law: selective enforcement
that disadvantages environmentally beneficial produ cts. This is the
reverse of the usual concern that environmental and labor laws will be
selectively enforced to gain a trade advantage. It raises, though, the same
question of fairness: Is trade law in its current form undermining im-
portant nontrade values? This Part examines cases challenging govern-
ment financial support and “unfair” trade practices in two sectors—
energy and fisheries. In both sectors, trade law is actively used to regulate
government su p port for natural resource substitutes (renewable energy
and farmed fish) but rarely, if ever, used to challenge government sup-
port for production and consumption of the natural resources
themselves.
These two sectors are two of the most important to the global
economy, with fuels constituting the most traded commodity in the world
and fish the most traded food commodity.
66
The existence of selective
enforcement in these two sectors is therefore important in and of itself. It
also, however, suggests a broader pattern in which trade enforcement
systematically disadvantages products that compete with established
natural resource--intensive industries.
65. Agreement Establishing the Advisory Centre on WTO Law art. 2, opened for
signature Nov. 30, 1999, 2299 U.N.T.S. 249 (entered into force July 15, 2001).
66. WTO, International Trade Statistics 2015, at 72 (2015), http://www.wto.org/
english/res_e/statis_e/its2015_e/its2015_e.pdf [http://perma.cc/QX2V-XNR8] (noting
that fuel is the highest traded major commodity with 16.6% of global exports); Martin D.
Smith et al., Sustainability and Global Seafood, 327 Science 784, 784 (2010) (noting that
“[s]eafood is . . . the most highly traded food commodity internationally”).
506 COLUMBIA LAW REVIEW [Vol. 118:491
A. Selective Enforcement in the Energy Sector
Energy production can be broken down into two types, broadly
speaking: (1) energy produced from fossil fuels, such as oil, gas, and coal;
and (2) renewable energy, including solar, wind, and biofuels.
67
The con-
sumption of fossil fuels to produce energy releases greenhouse gases
linked to climate change.
68
The threat posed by climate change has made
reducing greenhouse gas emissions a central objective of both govern-
ments and the private sector.
69
Renewable energy furthers this objective
through low- or zero-emission energy production.
Both fossil fuels and renewable energy benefit from government
support. In 2014, governments subsidized fossil fuels to the tune of
approximately $934 billion.
70
Renewables received only $135 billion.
71
In
recent years, governments have enforced trade law vigorously against re-
newable energy subsidies. No government has ever, however, brought a
direct enforcement action challenging another’s support for fossil f uels
and its effects on pricing.
72
Since 2008, governments have initiated at least 25 challenges, either
directly before the WTO or through domestic mechanisms such as trade
remedy investigations, to other nations’ support for renewable energy.
73
Table 1 provides an overview of trade disputes involving government
support for renewable energy.
67. Renewable energy also includes more established forms, such as hydroelectric
(and arguably nuclear) generation, although renewable energy disputes have not focused
on these sources.
68. Intergovernmental Panel on Climate Change, Climate Change 2014 Synthesis
Report: Summary for Policymakers 5 (2014), http://www.ipcc.ch/pdf/assessment-
report/ar5/syr/AR5_SYR_FINAL_SPM.pdf [http://perma.cc/29NA-SP9L] (“Emissions of
CO
2
from fossil fuel combustion and industrial processes contributed about 78% of the total
[greenhouse gas] emissions increase from 1970 to 2010 . . . .”).
69. See Paris Agreement on Climate Change, supra note 18, at 1–2; Michael P.
Vandenbergh, Private Environmental Governance, 99 Cornell L. Rev. 129, 140–41 (2013)
(introducing the scheme of public and private governance dedicated to environmental
protection, including greenhouse gas reduction).
70. See infra section IV.A; infra notes 284–290.
71. See infra section IV.A; infra notes 291–292.
72. See Dispute Settlement Gateway, WTO, http://www.wto.org/english/tratop_e/
dispu_e/dispu_e.htm [http://perma.cc/JQF3-5DC6] [hereinafter WTO, Dispute Settlement
Gateway] (last visited Oct. 21, 2017) (listing and providing information on each WTO
dispute); see also De Bièvre, Espa & Poletti, supra note 16, at 412–13 (discussing and
analyzing the lack of trade cases challenging government financial support for fossil fuels);
Meyer, Explaining Energy Disputes, supra note 16, at 394–97 (same). The WTO collects
and publishes information on its cases and their subject matter, making it relatively simple
to determine that no WTO cases have involved direct challenges to government financial
support for fossil fuels. Similarly, governments report information on domestic trade
remedies investigations, which can be searched for evidence of direct challenges to fossil
fuel subsidies.
73. See infra Table 1.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 507
TABLE 1: R ENEWABLE ENERGY TRADE DISPUTES
Date
74
Type of Dispute
(Legal Claim)
75
Complainant
76
Respondent
77
Industry/
Program
Targeted
June
2008
78
Domestic
(AD/CVD)
European
Union
United States Biodiesel
March
2009
79
Domestic
(AD/CVD)
Peru United States Biodiesel
74. The date listed refers to the date a government initiated a dispute. For WTO
disputes, this means the date on which a party filed a request for consultations. For
domestic disputes, this means the date on which a government initiated an investigation.
Hence, Table 1 understates the number of domestic trade remedies complaints filed by
including only those that result in an investigation. Moreover, Table 1 lists all WTO
complaints but lists only the first domestic investigation if subsequent investigations
appear linked, rather than including each subsequent investigation or review. WTO trade
remedy disputes, of course, require a domestic trade remedy dispute in the first instance.
See infra text accompanying notes 115–116 (explaining the “trade remedies” governments
impose upon others under national law and the procedure under which nations may
challenge these trade remedies before the WTO). Nonetheless, Table 1 lists only the WTO
dispute in such instances. Thus, for WTO cases the initial imposition of trade remedies will
have been earlier.
75. Because antidumping and countervailing-duty investigations often overlap, Table
1 uses “AD/CVD” as shorthand for a domestic trade remedy case, although not all trade
remedy disputes listed included both antidumping and countervailing-duty investigations.
“AD” refers to an antidumping investigation or claim; “CVD” to a countervailing-duty
investigation or claim; “SCM” to a claim brought directly under the Agreement on
Subsidies and Countervailing Measures; and “NT” to a national treatment claim brought
under GATT Article III or TRIMs Article 2. For an explanation of these terms, see infra
notes 102–107, 115–124 and accompanying text.
76. “Complainant” and “Respondent” refer to the countries involved. In trade
remedy investigations, however, the actual petitioner and respondent will be private
parties from the named countries. Note that this means that, for WTO cases, the
respondent is the party imposing duties.
77. See supra note 76.
78. See Investigations: Initial Investigation AD531, European Comm’n, http://
trade.ec.europa.eu/tdi/case_hi story .cfm?id=644 &i ni t=644 [http://perma.cc/337B-F5F2]
(last updated Oct. 10, 2017).
79. Peru: Definitive Antidumping Duty on Imports of Biodiesel from the United
States of America, Glob. Trade Alert (Mar. 26, 2009), http://www.globaltradealert.org/state-
act/944 [http://perma.cc/3HNK-ETVG]; Peru: Extension of Definitive Countervailing
Duty on Imports of Biodiesel from the United States of America, Glob. Trade Alert (Mar.
26, 2009), http://www.globa ltradealert.org/state-act/6181 [http://perma.cc/Q3DX-MVPL].
508 COLUMBIA LAW REVIEW [Vol. 118:491
Date
Type of Dispute
(Legal Claim)
Complainant Respondent
Industry/
Program
Targeted
June
2010
80
Domestic
(AD/CVD)
Australia United States Biodiesel
August
2010
81
Domestic
(AD/CVD)
European Union
Canada,
Singapore
Biodiesel
(from U.S.)
September
2010
82
WTO
(NT, SCM)
European
Union,
Japan
Canada
Ontario
Province’s
Feed-in
Tariff
November
2011
83
Domestic
(AD/CVD)
United States China Solar Panels
November
2011
84
Domestic
Investigation
(NT)
China United States
State-level
Renewable
Energy
Support
Programs
November
2011
85
Domestic
(AD/CVD)
European Union United States Ethanol
January
2012
86
Domestic
(AD/CVD)
United States China, Vietnam
Wind
Components
80. Michael Darby, U.S. Dep’t of Agric. Foreign Agric. Serv., Australia: Biofuels Annual
(2010), http://gain.fa s.us da .go v/Recent%20GAIN%20Publications/Biofuels%20Annual_
Canberra_Australia_07-06-2010.pdf [http://perma.cc/9J4H-A4HM].
81. Commission Regulation 720/2010, 2010 O.J. (L 211) 1, 1 (EU).
82. Request for Consultations by the European Union, Canada—Measures Relating
to the Feed-in Tariff Program, WTO Doc. WT/DS426/1 (Aug. 16, 2011); Request for
Consultations by Japan, Canada—Certain Measures Affecting the Renewable Energy
Generation Sector, WTO Doc. WT/DS412/1 (Sept. 16, 2010).
83. James O’Toole, U.S. to Investigate Chinese Solar ‘Dumping’ Claims, CNN Money
(Nov. 9, 2011), http://money.cnn.com/2011/11/09/technology/china_solar_investigation/
index.htm [http://perma.cc/3EF8-GQJB].
84. Joanna I. Lewis, The Rise of Renewable Energy Protectionism: Emerging Trade
Conflicts and Implications for Low Carbon Development, 14 Global Envtl. Pol., no. 4,
2014, at 17, 22 tbl.2.
85. See Investigations: Initial Investigation AS581, European Comm’n, http://
trade.ec.europa.eu/tdi/case_histoy.cfm?ref=c om&i nit=1830 [http://perma.cc/9LC8-NU7X]
(last updated Oct. 30, 2017).
86. U.S. Int’l Trade Comm’n, Utility Scale Wind Towers from China and Vietnam 1
(2012), http://www.usitc.gov/publications/701_731/pub4304.p df [http://perma.cc/ZQE8-
Q3S9].
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 509
Date
Type of Dispute
(Legal Claim)
Complainant Respondent
Industry/
Program
Targeted
July
2012
87
Domestic
(AD/CVD)
China
United States,
South Korea,
European
Union
Polysilicon
September
2012
88
Domestic
(AD/CVD)
European Union China Solar Panels
September
2012
89
WTO
(AD/CVD)
China United States
Wind
Components
(among
other
products)
November
2012
90
Domestic
(AD/CVD)
India
China, Taiwan,
Malaysia,
United States
Solar Panels
November
2012
91
WTO
(NT, SCM)
China
European
Union, Greece,
Italy
Certain EU
Member
States’ Feed-
in Tariffs
May
2013
92
WTO
(NT, SCM)
Argentina
European
Uni
on
Biodiesel
87. White & Case LLP, General Trade Report---JETRO 4 (2012), http://www.jetro.go.jp/
ext_images/theme/wto-fta/news/pdf/w_c_monthly_report-2012_November.pdf [http://
perma.cc/4K8S-JAGE].
88. See Investigations: Initial Investigation AD590, European Comm’n, http://
trade.ec.europa.eu/tdi/case_history.cfm? ref=com&init=1895 [http://perma.cc/DC78-AK5X]
(last updated Oct. 11, 2017).
8
9. Request for Consultations by China, United States—Countervailing and Anti-
Dumping Measures on Certain Products from China, WTO Doc. WT/DS449/1 (Sept. 20,
2012).
90. Marc Roca, India Plans Levy on US, Malaysia, and Taiwan Solar Panels, Livemint
(May 23, 2014), http://www.livemint.com/Industry/xnaPavrARluBZyUCnRTQEL/India-
recommends-solar-levy-for-panels-from-US-China-and-Ta.html [http://perma.cc/YT2U-4GQC]
(last updated May 24, 2014).
91. Request for Consultations by China, European Union and Certain Member
States—Certain Measures Affecting the Renewable Energy Generation Sector, WTO Doc.
WT/DS452/1 (Nov. 7, 2012).
92. Request for Consultations by Argentina, European Union and Certain Member
States—Certain Measures on the Importation and Marketing of Biodiesel and Measures
Supporting the Biodiesel Industry, WTO Doc. WT/DS459/1 (May 23, 2013).
510 COLUMBIA LAW REVIEW [Vol. 118:491
Date
Type of Dispute
(Legal Claim)
Complainant Respondent
Industry/
Program
Targeted
February
2013
93
WTO
(NT, SCM)
United States India
India’s
National
Solar
Mission
December
2013
94
WTO
(AD)
Argentina
European
Union
Biodiesel
June
2014
95
WTO
(AD)
Indonesia
European
Union
Biodiesel
December
2014
96
Domestic
(AD/CVD)
Canada China Solar
April
2015
97
Domestic
(AD/CVD)
Peru Argentina Biodiesel
January
2016
98
Domestic
(AD/CVD)
China United States Biofuels
93. Request for Consultations by the United States, India—Certain Measures Relating
to Solar Cells and Solar Modules, WTO Doc. WT/DS456/1 (Feb. 11, 2013).
94. Request for Consultations by Argentina, European Union—Anti-Dumping
Measures on Biodiesel from Argentina, WTO Doc. WT/DS473/1 (Jan. 8, 2014).
95. Request for Consultations by Indonesia, European Union—Anti-Dumping
Measures on Biodiesel from Indonesia, WTO Doc. WT/DS480/1 (June 17, 2014).
96. Archived -- Statement of Reasons: Concerning the Initiation of Investigations into the
Dumping and Subsidizing of Certain Photovoltaic Modules and Laminates Originating in or
Exported from the People’s Republic of China, Can. Border Servs. Agency (Dec. 19, 2014),
http://www.cbsa-asfc.gc.ca/sima-lmsi/i-e/ad1405/ad1405-i14-de-eng.html [http://perma.cc/
RK7E-HA22] (last updated July 30, 2015).
9
7. Peru: Definitive Antidumping Duty on Imports of Biodiesel B100 from Argentina,
Glob. Trade Alert (Oct. 26, 2016), http://www.globaltradealert.org/intervention/19870
[http://perma.cc/X8FV-4UAA].
98. Erin Voegele, China Takes Action Against US DDGS, Ethanol Imports, Ethanol
Producer Mag. (Jan. 11, 2017), http://ethanolproducer.com/articles/14061/china-takes-
action-against-us-ddgs-ethanol-imports [http://perma.cc/6PUF-WK7F].
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 511
Date
Type of Dispute
(Legal Claim)
Complainant Respondent
Industry/
Program
Targeted
September
2016
99
WTO
(NT, SCM)
India United States
Subnational
Renewable
Energy
Measures
April
2017
100
Domestic
(AD/CVD)
United States
Argentina,
Indonesia
Biodiesel
February
2018
101
WTO
(Safeguards)
China,
European Union
United States Solar Cells
Both international and national trade rules apply to government
financial support for products. Internationally, this Article focuses on
WTO rules, which have been applied to government support for energy
in several ways. The most direct way is through the WTO’s Agreement on
Subsidies and Countervailing Measures (SCM Agreement), which allows
nations to challenge discriminatory or injurious subsidies.
102
The SCM
Agreement’s rules, however, are somewhat technical and, in practice,
impose a difficult evidentiary burden on complaining states.
103
The diffi-
99. Request for Consultations by India, United States—Certain Measures Relating to
the Renewable Energy Sector, WTO Doc. WT/DS510/1 (Sept. 19, 2016).
100. Fact Sheet: Commerce Preliminary Finds Countervailable Subsidization of
Imports of Biodiesel from Argentina and Indonesia, Int’l Trade Admin., http://
enforcement.tr ade.gov/download/factsheets/f actsheet-multiple-biodiesel-cvd-prelim-
082217.pdf [http://perma.cc/2TSP-P4A7] (last visited Oct. 10, 2017).
101. Brian Bradley, EU, China Request WTO Consultations Over U.S. Safeguards on
Solar Cells, American Shipper (Feb. 8, 2018), http://www.americanshipper.com/main/
news/eu-china-request-wto-consultations-over-us-safegua-70552.aspx?source=Little4 [http://
perma.cc/3XBG-D6CX].
102. SCM Agreement, supra note 10, art. 4.
103. In order to obtain relief under the SCM Agreement, a complainant must first
show that there has been a subsidy within the meaning of the SCM Agreement. See id.
arts. 1, 4.2, 7.2, 11.2 (defining a subsidy and requiring proof of a subsidy’s existence to
obtain relief and initiate investigations under the GATT). Such a showing requires (1) a
financial contribution—broadly defined to include, inter alia, tax credits and the transfer
of goods—by the respondent government (2) that has conferred a benefit on the
recipient, meaning that the government made its financial contribution on better terms
than those available in the marketplace. See id. art. 1.1. Therefore, in a subsidies case
before the WTO’s Dispute Settlement Body (DSB), the complaining party bears the
burden of demonstrating the existence of a subsidy. Demonstrating a benefit can be
difficult in markets with significant government intervention, such as energy markets,
because no free market comparison exists.
Moreover, after demonstrating the existence of a subsidy, the complainant still must
show that the subsidy either is “specific” to an industry or enterprise or is otherwise
prohibited. See id. arts. 1.2, 2, 8.1 (subjecting a subsidy to the SCM Agreement’s
prohibitions and liabilities only if it is “specific,” defining when a subsidy is “specific,” and
512 COLUMBIA LAW REVIEW [Vol. 118:491
culty of succeeding on an SCM claim pushes governments to challenge
other governments’ support for industry through generally appl icable
GATT rules.
104
For example, discriminatory government-support measures
may be more easily challenged under Article III of the GATT, which
creates a nondiscrimination rule known as the national treatment (NT )
obligation.
105
GATT Article III provides that a nation may not treat
foreign goods less favorably than it treats its own “like” products.
106
Local
content requirements—rules that condition a benefit, such as a subsidy,
on use of locally produced materials or equipment—violate the NT
rule.
107
Six disputes have challenged government support for renewable
energy directly before the WTO on SCM or NT grounds.
108
In the most
explicitly rendering non-specific subsidies “non-actionable”). General subsidies, such as
those available to consumers or through generally applicable provisions of the tax code,
do not count. Id. art. 2.2. The SCM Agreement also prohibits two narrow classes of
discriminatory subsidies: (1) those contingent on export performance and (2) those
contingent on the use of domestic products. Id. art. 3. Such subsidies are per se specific
and the respondent government must remove them, id. art. 2.3, lest the complaining
government gain the right to retaliate, id. art. 4.10.
If the SCM Agreement does not outright prohibit a subsid y, however, the
complaining party must show that the subsidy causes “adverse effects” before the
respondent government is obliged to remove the offending subsidy. See id. arts. 5, 7.2
(defining adverse effects and exemplifying the showing of injury a member must make to
request consultations under the SCM Agreement). In this way, subsidies cases differ from
other kinds of trade cases. In the run-of-the-mill WTO dispute, “nullification or
impairment” (the WTO term for damage) is presumed. DSU, supra note 54, art. 3.8. In
most subsidies cases, however, the complainant must demonstrate harm before the
obligation to remove the subsidy applies. This additional showing makes it much more
difficult for the complaining party to prevail in an SCM dispute.
104. Programs challenged in this way are often subsidies in a colloquial sense but may
not constitute “subsidies” within the meaning of the SCM Agreement. For this reason, this
Article uses the term “government support” to refer to the broader class of measures that
governments adopt that provide financial assistance to their domestic industries.
105. The Agreement on Trade-Related Investment Matters (TRIMs Agreement)
incorporates the national treatment obligation, and it holds that governments may not
treat foreign investors less favorably than similarly situated domestic investors. See
Agreement on Trade-Related Investment Measures art. 2, Apr. 15, 1994, Marrakesh
Agreement Establishing the World Trade Organization, Annex 1A, 1868 U.N.T.S. 186
(prohibiting trade-related investment matters that are “inconsistent with the provisions of
Article III”). Furthermore, although the SCM Agreement prohibits discriminatory
subsidies, SCM Agreement, supra note 10, art. 3, challenging a discriminatory government
support program under the national treatment rule avoids the need to prove that a
“subsidy” within the meaning of the SCM Agreement exists in the first place, see id. arts.
1–2.
106. GATT, supra note 36, art. III.
107. Holger P. Hestermeyer & Laura Nielsen, The Legality of Local Content Measures
Under WTO Law, 48 J. World Trade 553, 566 (2014).
108. A seventh dispute between Argentina and the European Union involves a local
content requirement on biofuels in Spain. This dispute, however, does not appear to
involve financial support, so it is omitted. See Request for Consultations by Argentina,
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 513
important such case, the WTO Appellate Body up h eld a finding that
Ontario (and therefore Canada) violated the NT obligation in its Feed-in
Tariff Program.
109
Under that program, electricity producers qualified
for preferential rates from the government if they produced a certain
amount of their electricity from renewable sources, provided that the
equipment used to generate the renewable energy was manufactured in
Ontario.
110
The WTO’s Dispute Settlement Body (DSB) found that such
a local content requirement violates the NT obligation by disadvantaging
foreign products that compete with the locally produced goods.
111
In
2016, the WTO Appellate Body upheld a similar finding about a local
content requirement in India’s national solar support program in a case
brought by the United States.
112
The United States also challenged an
allegedly discriminatory wind subsidy in China,
113
although China agreed
to remove the subsidy without further proceedings.
114
National trade laws also allow governments to respond to “unfair”
trading practices of other countries, most notably government support.
115
These laws are known as “trade remedies.” Although trade remedies are
imposed under national laws and do not require the WTO’s permission,
the WTO has rules on their use.
116
Hence, countries can challenge an-
other nation’s imposition of trade remedies before the WTO.
The two most relevant kinds of trade remedies are (1) countervail-
ing duties and (2) antidumping duties. Countervailing duties offset the
European Union and a Member State—Certain Measures Concerning the Importation of
Biodiesels, WTO Doc. WT/DS443/1 (Aug. 17, 2012) (requesting consultations over an
order providing for computation of biofuel targets based only on biodiesel produced in
EU member states).
109. Canada—Feed-in Tariff Program, supra note 14, para. 5.85 (finding that
Canada’s local content requirement (LCR) programs—“Minimum Required Domestic
Content Levels”—violate Article III, section 4 of the GATT 1994 standards).
110. See id. paras. 1.1–1.4 (describing the Ontario Feed-in Tariff Program and its
“Minimum Required Domestic Content Levels”).
111. See id. para. 5.85.
112. Appellate Body Report, India—Certain Measures Relating to Solar Cells and
Solar Modules, para. 6.2.c, WTO Doc. WT/DS456/AB/R (adopted Oct. 14, 2016)
[hereinafter India—Solar Cells and Modules].
113. Request for Consultations by the United States, China—Measures Concerning
Wind Power Equipment, WTO Doc. WT/DS419/1 (Jan. 6, 2011).
114. Doug Palmer & Leonora Walet, China Agrees to Halt Subsidies to Wind Power
Firms, Reuters (June 7, 2011), http://www.reuters.com/article/us-china-windpower/china-
agrees-to-halt-subsidies-to-wind-power-firms-idUSTRE7561B920110607 (on file with the
Columbia Law Review).
115. See Judith Goldstein, Ideas, Institutions, and American Trade Policy, 42 Int’l Org.
179, 197–98 (1988) (describing the rise of “fair trade” laws in the United States).
116. See Request for Consultations by the United States, China—Measures
Concerning Wind Power Equipment, supra note 113 (alleging procedural violations of the
GATT and SCM Agreement for, inter alia, failing to properly notice various trade
measures).
514 COLUMBIA LAW REVIEW [Vol. 118:491
effects of subsidies by another government.
117
Countervailing duties thus
attack the same problem as the SCM Agreement (and, in fact, the SCM
Agreement contains rules on countervailing duties).
118
A government
seeking to respond to a subsidy can thus either bring a WTO case directly
under the SCM Agreement, or impose countervailing duties. Imposing
countervailing duties requires findings similar to those necessary to make
out an SCM claim, including the existence of a subsidy within the mean-
ing of WTO rules.
119
Significantly, however, those findings are made by
the national government imposing the duties, rather than by a neutral
international tribunal.
120
Antidumping duties are more flexible than countervailing duties
and can also respond to government subsidization. Dumping—the trig-
ger, unsurprisingly, for the imposition of antidumping duties—involves a
producer’s selling its good in the importi ng country at less than what the
importing government considers “normal” value.
121
Antidumping duties
therefore target private conduct: the pricing decisions of firms.
122
Governments have a great deal of flexibility, however, in how they calcu-
late normal value.
123
This flexibility allows governments to use antidump-
ing duties to respond to prices that are artificially low due to another
government’s financial support. Indeed, the original GATT provisions on
antidumping and countervailing duties recognized that either could be
imposed in response to the same underlying set of facts.
124
117. GATT, supra note 36, art. VI.3. (“No countervailing duty shall be levied on any
product of the territory of any contracting party imported into the territory of another
contracting party in excess of an amount equal to the estimated bounty or subsidy
determined to have been granted . . . .”).
118. See SCM Agreement, supra note 10, pt. V (discussing countervailing measures).
119. Specifically, the domestic investigating authority must find (1) a subsidy, (2)
injury to domestic industry, and (3) causation. Id. art. 11.2.
120. See id. pt. V (describing the rules for national investigating authorities assessing
whether to impose countervailing duties).
121. In order to impose antidumping duties, the domestic authority must find (1)
dumping, (2) injury to a domestic industry, and (3) causation. General Agreement on Tariffs
and Trade art. VI.1, July 1986, http://www.wto.org/en glish/d ocs_ e/legal_e/gatt47_e.pdf
[http://perma.cc/6GXD-FH7H] [hereinafter GATT 1986]; Protocol Modifying Part II and
Article XXVI of the General Agreement on Tariffs and Trade art VI.1, Sept. 14, 1948, 62
U.N.T.S. 80 [hereinafter GATT 1948 Amendments].
122. A government cannot bring a WTO action directly challenging dumping, since
WTO rules only discipline government action.
123. Agreement on Implementation of Article VI of the General Agreement on Tariffs
and Trade 1994 art. 2.2, Apr. 15, 1994, Marrakesh Agreement Establishing the World
Trade Organization, Annex 1A, 1868 U.N.T.S. 201 (explaining that, generally, “the
margin of dumping shall be determined by comparison with a comparable price of the
like product when exported to an appropriate third country”).
124. GATT 1948 Amendments, supra note 121, art. VI.5 (“No product of the territory
of any contracting party imported into the territory of any other contracting party shall be
2018] FREE TRADE AND SELECTIVE ENFORCEMENT 515
Yet a third kind of trade remedy, rarely used, is that of safeguards. In
January 2018, President Trump imposed thirty percent tariffs on solar
cells imported into the United States pursuant to a safeguards investiga-
tion. Unlike antidumping and countervailing duties, safeguards do not
require a finding that another country (or its producers) has behaved
unfairly.
125
Instead, safeguards focus entirely on the degree of injury to
the domestic producer.
126
In February 2018, China and the EU chal-
lenged the United States’ imposition of safeguards before the WTO. As
this Article goes to print, this case remains in its infancy.
127
Returning to the disputes described in Table 1, eighteen of the re-
maining nineteen disputes involve the national application of trade
remedies.
128
These disputes target solar, wind, and biofuel products.
129
This wide range of products, spanning the renewable energy sector,
demonstrates countries’ willingness to use trade law to challenge gov-
ernment support for different sources of renewable energy with roots in
different areas of the economy. Solar and wind energy, for instance, tend
to be manufacturing industries, while the biofuel industry is grounded in
agriculture. Only three of these disputes have made it to the WTO. In
one of these cases, China prevailed in a challenge to the United States’
imposition of countervailing duties on a number of products, including
solar panels and wind turbines.
130
In the other two disputes, Argentina
and Indonesia each challenged the EU’s imposition of antidumping du-
ties on biodiesel fuels, which are fuels made from plant and animal fats
that emit fewer greenhouse gases than fossil fuels.
131
These disputes are
at the heart of a broader trade war over biofuels that includes not only
these three countries, but also Australia, China, Peru, and the United
States.
132
subject to both anti-dumping and countervailing duties to compensate for the same
situation of dumping or export subsidization.”).
125. See GATT, supra note 36, art. XIX.
126. Id.
127. Bradley, supra note 101.
128. The eighteenth involved a Chinese domestic investigation of U.S. support for
renewable energy in violation of the national treatment rule. See supra Table 1.
129. See supra Table 1.
130. Appellate Body Report, United States—Countervailing Duty Measures on Certain
Products from China, para. 5, WTO Doc. WT/DS437/AB/R (adopted Dec. 18, 2014). The
essence of China’s claim was that the United States impermissibly counted subsidies from
Chinese state-owned enterprises (SOEs). Id. The Appellate Body accepted that the United
States had impermissibly used the subsidies provided by Chinese SOEs but declined to rule
that WTO members could never rely on such subsidies in a CVD analysis. Id.
131. Appellate Body Report, European Union—Anti-Dumping Measures on Biodiesel
from Argentina, paras. 1.3–1.4, WTO Doc. WT/DS473/AB/R (adopted Oct. 6, 2016);
Request for Consultations by Indonesia, European Union—Anti-Dumping Measures on
Biodiesel from Indonesia, supra note 95, paras. II.1–II.15.
132. See supra Table 1.
516 COLUMBIA LAW REVIEW [Vol. 118:491
In contrast to this robust history of challenges to renewable energy,
not a single case has ever been brought before the GATT or WTO
directly challenging government support for fossil fuels on either SCM or
NT grounds.
133
In terms of trade remedies, the EU imposed antidumping
duties on a range of Russian products, such as steel and ammonium ni-
trate, partly on the grounds that Russia subsidizes energy consumption.
134
Notably, though, these antidumping duties were not imposed directly in
response to energy subsidies. Rather, they were imposed on energy-
intensive downstream products that presumably benefit from such subsi-
dies.
135
Russia currently has a challenge to the use of antidumping duties
in this way pending at the WTO.
136
Nor does this absence of disputes against fossil fuels stem from any
systematic differences between fossil fuel subsidies and renewable energy
subsidies.
137
To be sure, some have alleged that fossil fuel subsidies are
systematically different from renewable energy subsidies. This claim rests
in part on the existence of local content requirements in renewable
energy subsidies and in part on the claim that fossil fuel subsidies are
structured in ways that are less amenable to challenge under the SCM
Agreement.
138
In fact, however, local content requirements are rampant
in the fossil fuel sector as well. A 2013 World Bank study identified local
content policies supporting the fossil fuel sector in forty-eight nations.
139
Moreover, if renewable energy subsidies were systematically more suscep-
tible to challenge under the SCM Agreement, we would expect to see
nations regularly relying on the SCM Agreement to bring their renewa-
ble energy challenges. Yet as Table 1 attests, the SCM Agreement is used
only rarely to challenge renewable energy subsidies. This strongly
133. De Bièvre, Espa & Poletti, supra note 16, at 412–13; Meyer, Explaining Energy
Disputes, supra note 16, at 392–93.
134. Request for Consultations by the Russian Federation, European Union—Cost
Adjustment Methodologies and Certain Anti-Dumping Measures on Imports from Russia
(Second Complaint), paras. 3, 5, WTO Doc. WT/DS494/1 (May 19, 2015).
135. See id. (describing subsidies on ammonium nitrate as well as several types of
tubing that would conceivably benefit from subsidized energy prices).
136. Id. paras. 5.1–5.2. Although energy consumption subsidies may have played a role
in the imposition of other antidumping duties on energy-intensive products in other
instances, my research has not turned up other such instances. Barring a WTO challenge,
such instances are difficult to identify precisely because the energy subsidies and energy-
related products are not themselves the target of the actions.
137. See Meyer, Explaining Energy Disputes, supra note 16, at 399.
138. See De Bièvre, Espa & Poletti, supra note 16, at 417–18.
139. Silvana Tordo, Michael Warner, Osmel E. Manzano & Yahya Anouti, World Bank,
Local Content Policies in the Oil and Gas Sector xiii, 93–155 (2013) (discussing the overall
findings of the study on local content policies); see also Meyer, Explaining Energy
Disputes, supra note 16, at 399 (discussing research on local content policies in the fossil
fuel sector).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 517
suggests that the structures of the subsidies are not driving the rate of
challenge.
Disputes over government support for the energy sector thus show a
clear trend. Governments are willing to use WTO rules to challenge
other governments’ financial support for renewable energy, but not for
fossil fuels, despite the fact that support for fossil fuels is many times that
for renewable energy.
140
As Parts III and IV explain, this selective enforce-
ment magnifies the discrepancy in subsidization between fossil fuels and
renewable energy. In doing so, selective enforcement reinforces the
market dominance of increasingly scarce and environmentally harmful
fossil fuels.
B. Selective Enforcement in the Fisheries Sector
A remarkably similar story plays out in the world of fish. Seafood is
the highest traded food commodity by value in the world.
141
It is central
to the livelihood and food security of billions of people; indeed, over
three billion people rely on fish as their primary source of protein.
142
Like energy, fish can be divided into natural resources that must be cap-
tured (wild fish) and substitute resources that are largely “manufac-
tured” (fish produced through aquaculture, also called farmed fish).
Fishing nations have for years granted huge subsidies to their fishing
fleets to capture wild fish.
143
The result has been widespread overfishing,
leading to dangerously low stocks of certain breeds of fish.
144
Aquaculture
seeks to provide an alternative to wild stocks—allowing wild stocks to
recover—while also achieving greater efficiency than fishing fleets.
145
Yet
just as nations do not enforce trade laws against subsidies for traditional
fossil energy, nations do not invoke trade rules to challenge subsidies for
140. A greater amount of the world’s energy still comes from fossil fuels as opposed to
renewables. See Energy Info. Admin., Monthly Energy Review: October 2017, at 4 fig.1.2
(2017), http://www.eia.gov/totalenergy/data/monthly/pdf/mer.pdf [http://perma.cc/5F6Y-
2GRE] (showing that coal, crude oil, and natural gas have produced more energy than
renewable sources in every year since 1949). Thus, on a per-unit basis, the discrepancy
between the amounts of subsidies likely would not be as great. I thank Joe Margolies for
this point. Even a smaller discrepancy between the amounts of subsidies, though, cannot
account for the complete lack of challenges to fossil fuel subsidies.
141. Em iko Terazono, Salmon Leaps Past Shrimp in Global Fish Market, Fin. Times
(Jan. 18, 2016), http://www.ft.com/content/4341c29e-bdd4-11e5-9fdb-87b8d15baec2 (on
file with the Columbia Law Review) [hereinafter Terazono, Salmon Leaps Past Shrimp].
142. Sustainable Seafood: Overview, World Wildlife Fund, http://www.worldwildlife.org/
industries/sustainable-seafood [http://perma.cc/U4F-MB22] (last visited Jan. 23, 2018).
143. See infra section IV.B.
144. See Margaret A. Young, Trading Fish, Saving Fish: The Interaction Between
Regimes in International Law 6 (2011) (discussing the “global fisheries crisis”).
145. To be sure, in practice aquaculture has a mixed environmental record.
Investment in aquaculture is ultimately necessary to make it environmentally sustainable.
This Article explores this question in more detail in Part IV.
518 COLUMBIA LAW REVIEW [Vol. 118:491
wild fishing. Instead, nations—most notably the United States—regularly
invoke trade rules to challenge government support for aquaculture.
Just as in the energy sector, no WTO member to date has ever di-
rectly challenged another WTO member’s financial support for fisheries
before the WTO under either the SCM Agreement or the GATT’s gener-
ally applicable measures.
146
But while governments are reluctant to bring
fisheries support cases directly to the WTO, they have few qualms about
challenging such support through national trade remedies. The UN
Food and Agriculture Organization (FAO) notes that “[t]he only cases so
far in international trade related to subsidies and fish exports stem from
aquaculture.”
147
In other words, trade rules on government support are
enforced exclusively against farmed fish.
Nine WTO fisheries disputes challenged the imposition of anti-
dumping and countervailing duties.
148
Seven of these disputes challenged
the United States’ imposition of trade remedies on shrimp from Asian
and South American countries.
149
An eighth case challenged the United
States’ imposition of duties on Chilean salmon.
150
In the lone WTO
dispute in which the United States is not the r espondent, Norway
challenged the European Union’s imposition of duties on salmon.
151
At
least seven other domestic investigations in the United States and Europe
have resulted in the imposition of domestic trade remedies that have not
been challenged before the WTO.
152
146. See infra Table 2.
147. Subsidies and Trade Distortion, UN Food & Agric. Org., http://www.fao.org/
fishery/topic/12358/en [http://perma.cc/48QK-T2JP] (last visited Oct. 10, 2017); see
also Frank Asche, Aquaculture: Opportunities and Challenges 12 (2015), http://
e15initiative.org/wp-content/uploads/2015/05/E15_Fisheries_Asche_FINAL.pdf [http://
perma.cc/A7YN-GRJ4] (noting that the “dumping of seafood has been a WTO concern primarily
in relation to aquaculture”).
148. See infra Table 2. A number of ot her WTO disputes have challenged a range of
market-access restrictions, ranging from outright bans to labeling requirements. WTO,
Dispute Settlement Gateway, supra note 72.
149. See infra Table 2.
150. See infra Table 2.
151. See infra Table 2.
152. See infra Table 2.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 519
TABLE 2: F ISHERIES TRADE DISPUTES
Date
153
Type of Dispute
(Legal Claim)
154
Complainant
155
Respondent
156
Industry/
Program
Targeted
June
1990
157
Domestic
(AD/CVD)
United States Norway Salmon
September
1996
158
Domestic
(AD/CVD)
United States China Crawfish
August
1997
159
WTO
(AD/CVD)
Chile United States Salmon
June
2002
160
Domestic
(AD/CVD)
United States Vietnam
Frozen Fish
Fillets
December
2002
161
Domestic
(AD/CVD)
European
Union
Norway/Faroe
Islands
Trout
153. For WTO cases, the date listed refers to the date of the request for consultations.
Of course, a WTO case is premised on an underlying domestic investigation, but Table 2
does not list the domestic investigations separately. Thus, for WTO cases, the initial
imposition of trade remedies will have been earlier. The exception is for the 2005
imposition of duties by the United States on shrimp from a number of countries. Since not
all subject countries brought WTO disputes, Table 2 lists that dispute separately. For
domestic cases, the date listed is the date on which the government initiated an
investigation. Table 2 lists all WTO complaints but lists only the first domestic
investigation, rather than including each subsequent review and reimposition of duties.
154. “AD” refers to an antidumping investigation or claim; “CVD” refers to a
countervailing-duty investigation or claim.
155. “Complainant” and “Respondent” refer to the countries involved. In trade
remedy investigations, however, the actual petitioner and respondent will be private
parties from the named countries. Note that this means that, for WTO cases, the
respondent is the party imposing duties.
156. See supra note 155.
157. Fresh and Chilled Atl. Salmon from Nor., Inv. No. 701-TA-302, USITC Pub. 2371
(Apr. 1991) (Final).
158. Crawfish Tail Meat from China, Inv. No . 731-TA-752, USITC Pub. 3002 (Nov.
1996) (Preliminary).
159. Request for Consultations by Chile, United States—Countervailing Duty
Investigation of Imports of Salmon from Chile, WTO Doc. WT/DS97/1 (Aug. 12, 1997).
160. Certain Frozen Fish Fillets from Viet., Inv. No. 731-TA-1012, USITC Pub. 3617
(Aug. 2003) (Final).
161. Notice of Initiation of an Anti-Dumping Proceeding Concerning Imports of
Large Rainbow Trout Originating in Norway and the Faeroe Islands, 2002 O.J. (C 318) 2.
520 COLUMBIA LAW REVIEW [Vol. 118:491
Date
Type of Dispute
(Legal Claim)
Complainant Respondent
Industry/
Program
Targeted
December
2003
162
Domestic
(AD/CVD)
United States
Brazil, China,
Ecuador, India,
Thailand,
Vietnam
Shrimp
December
2004
163
WTO
(AD/CVD)
Thailand United States Shrimp
November
2005
164
WTO
(AD/CVD)
Ecuador United States Shrimp
March
2006
165
WTO
(AD/CVD)
Norway
European
Union
Salmon
April
2006
166
WTO
(AD/CVD)
Thailand United States Shrimp
June
2006
167
WTO
(AD/CVD)
India United States Shrimp
February
2010
168
WTO
(AD/CVD)
Vietnam United States Shrimp
162. Certain Frozen or Canned Warmwater Shrimp and Pawns [sic] from Braz., China,
Equador [sic], India, Thai. & Viet., Inv. Nos. 701-TA-1063-1068, USITC Pub. 3748 (Jan.
2005) (Final) [hereinafter Warmwater Shrimp Investigation].
163. Request for Consultations by Thailand, United States—Provisional Anti-Dumping
Measures on Shrimp from Thailand, WTO Doc. WT/DS324/1 (Dec. 14, 2004).
164. Request for Consultations by Ecuador, United States—Anti-Dumping Measure on
Shrimp from Ecuador, WTO Doc. WT/DS335/1 (Nov. 21, 2005).
165. Request for Consultations by Norway, European Communities—Anti-Dumping
Measure on Farmed Salmon from Norway, WTO Doc. WT/DS337/1 (Mar. 22, 2006).
166. Request for Consultations by Thailand, United States—Anti-Dumping Measures
on Shrimp from Thailand, WTO Doc. WT/DS343/1 (Apr. 27, 2006).
167. Request for Consultations by India, United States—Customs Bond Directive for
Merchandise Subject to Anti-Dumping/Countervailing Duties, WTO Doc. WT/DS345/1
(June 12, 2006).
168. Request for Consultations by Viet Nam, United States—Anti-Dumping Measures
on Certain Shrimp from Viet Nam, WTO Doc. WT/DS404/1 (Feb. 4, 2010).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 521
Date
Type of Dispute
(Legal Claim)
Complainant Respondent
Industry/
Program
Targeted
February
2011
169
WTO
(AD/CVD)
China United States
Shrimp/
Diamond
Sawblades
February
2012
170
WTO
(AD/CVD)
Vietnam United States Shrimp
February
2014
171
Domestic
(AD/CVD)
European
Union
Turkey Trout
August
2015
172
Domestic
(AD/CVD)
European
Union
Turkey
Sea Bass/
Sea Bream
Sometimes, trading partners employ trade remedies explicitly
against farmed fish. In 2006, the EU imposed antidumping duties on
farmed salmon from Norway.
173
In announcing the antidumping duties,
the European Commission noted that “Norway decided in the early
1990s that, like oil, farmed fish is of st rategic economic importance and
this sector received considerable financial, organisational, political and
research support from the Norwegian state.”
174
As a result of this
subsidization, both the United States and the EU imposed trade reme-
dies in the 1990s against Norwegian salmon.
175
In its WTO case
169. Request for Consultations by China, United States—Anti-Dumping Measures on
Certain Frozen Warmwater Shrimp from China, WTO Doc. WT/DS422/1 (Mar. 2, 2011).
170. Request for Consultations by Viet Nam, United States—Anti-Dumping Measures
on Certain Shrimp from Viet Nam, WTO Doc. WT/DS429/1 (Feb. 27, 2012).
171. Notice of Initiation of an Anti-Subsidy Proceeding Concerning Imports of Certain
Rainbow Trout Originating in Turkey, 2014 O.J. (C 44) 9.
172. Notice of Initiation of an Anti-Subsidy Proceeding Concerning Imports of
European Sea Bass and Gilthead Sea Bream Originating in Turkey, 2015 O.J. (C 266) 4
[hereinafter Turkish Bass and Bream Notice].
173. Panel Report, European Communities—Anti-Dumping Measure on Farmed
Salmon from Norway, para. 2.4, WTO Doc. WT/DS337/R (adopted Nov. 17, 2007)
[hereinafter EC–Salmon—Norway].
174. Press Release, European Comm’n, Norwegian Salmon (Feb. 21, 2006), http://
europa.eu/rapid/press-release_MEMO-06-87_en.htm?locale=en [http://perma.cc/X9TN-
WQDM] (emphasis added).
175. See Mark T. Peterson, U.S. Trade Law and Imported Farmed Atlantic Salmon:
Protectionism or Protection of Free Trade, 2 Ocean & Coastal L.J. 33, 35–37 (1996)
(describing the case leadi ng to the imposi tion of antidumping and countervailing
duties against Norwegian salmon); Press Release, European Comm’n, Commission Agrees
Measures to Curb Norwegian Salmon Dumping (June 2, 1997), http://europa.eu /
rapid/press-release_IP-97-468_en.htm [http://perma.cc/P53 K-X2KT] (describing the
European Commission’s finding that from August 1995 to July 1996 “Norwegian salmon
was being exported to the EU at dumped prices and was also enjoying subsidies”).
522 COLUMBIA LAW REVIEW [Vol. 118:491
challenging the EU’s imposition of trade remedies, Norway noted that
the 2006 antidumping measures were a de facto continuation of the anti-
dumping and countervailing duties the EU had imposed since the
1990s.
176
Indeed, the European Commission itself suggested this connec-
tion in its order imposing the duties.
177
The Commission found that
violations of the earlier antidumping and antisubsidy measures meant
that EU producers had never been able to compete on cost with
Norwegian produce rs, leading in part to the di ff iculties European pro-
ducers faced in the mid-2000s.
178
Most other trade remedies cases do not formally distinguish between
farmed fish and wild fish. Farmed salmon and wild salmon, for example,
might be considered “like” products and thus fall within the same trade
remedies investigation.
179
Nevertheless, as Professor Frank As che, a noted
marine economist, has pointed out, the “dumping of seafood has been a
WTO concern primarily in relation to aquaculture.”
180
The reason is that
in the WTO era, the extraordinary growth in global fish production has
been primarily the result of aquaculture.
181
Indeed, the World Wildlife
Fund reports that “[s]almon aquaculture is the fastest growing food pro-
duction system in the world—accounting for 70 percent . . . of the
176. EC–Salmon—Norway, supra note 173, paras. 4.5–4.7 (“For the past 17 years,
hardly a year has gone by without some kind of restriction in place.”).
177. Comm ission Regulation 628/2005 of Apr. 22, 2005, Imposing a Provisional Anti-
Dumping Duty on Imports of Farmed Salmon Originating in Norway, 2005 O.J. (L 104) 5
(EC) [hereinafter Commission Regulation 628/2005]. In most trade remedies cases
brought to the WTO the complainant prevails, and this case was no different. Norway won
and the EU removed its antidumping measures in 2009. EU Repeals Anti-Dumping
Measures Against Norwegian Salmon, Nor.: Mission to the EU, (June 8, 2009),
http://web.archive.org/web/20170129131208/http://www.eu-norway.org/news/repeals_
anti_dumping/#.WeWB01KZNE4 [http://perma.cc/MCQ6-4JPS]. In 2012, the United
States lifted its antidumping duties on Norwegian salmon, marking the first time since
1991 that neither the United States nor the EU applied trade remedies against Norwegian
salmon. See Org. for Econ. Cooperation & Dev., OECD Review of Fisheries: Policies and
Summary Statistics 37 (2013).
178. Commiss ion Regulation 628/2005, supra note 177.
179. This distinguishes fish from energy. Farmed fish and wild fish are much more
similar, and hence more likely to be “like” products within the meaning of trade law, than
are fossil fuels and renewable energy products such as solar panels.
180. See Asche, supra note 147, at 12.
181. See, e.g., UN Env’t Programme, Green Economy and Trade: Trends,
Challenges, and Opportunities 93 (2013), http://web.unep.org/greeneconomy/sites/
unep.org.greeneconomy/files/fullreport.pdf [http://perma.cc/5NRG-GGZC] (“[T ]otal
catch from wild fisheries has remained relatively stable throughout the last three decades.
The source of significant growth in the global production of fish since the late 1980s has
been aquaculture . . . .”); Walter R. Keithly, Jr. & Pawan Poudel, The Southeast U.S.A.
Shrimp Industry: Issues Related to Trade and Antidumping Duties, 23 Marine Resource
Econ. 459, 462 (2008) (“Much of the growth in world warm-water shrimp production
since the 1980s has been the result of successful farming activities . . . . [G]rowth [in
farmed shrimp] has been particularly pronounced since the mid- to late-1990s.”).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 523
market.”
182
This increase in production from aquaculture puts downward
pressure on “dockside” prices—prices paid to fishermen
183
—for wild
caught fish, especially in developed countries like the United States and
the members of the EU.
184
U.S. antidumping investigations into shrimp illustrate why aquacul-
ture has been the primary target of antidumping duties. World exports of
shrimp more than quadrupled between 1980 and 2005, but the inflation-
adjusted value of such shrimp only slightly more than doubled.
185
The
result was a more than 50% decrease in the real price of shrimp in those
twenty-five years, owing primarily to increased shrimp farming.
186
More-
over, estimates put almost 90% of fish farming in Asia.
187
This dramatic
growth in supply created significant hardship for Am erican shrimpers,
especially along the Gulf of Mexico.
188
Indeed, some have compared the
outsourcing of the American shrimp industry to outsourcing in other
sectors such as textiles or manufacturing.
189
In 1985, the U.S. International Trade Commission (ITC) evaluated
the shrimp sector for possible action.
190
Increases in overseas shrimp
farming prompted a complaint from southeastern U.S. shrimp harvesters
alleging that foreign governments provided financial assistance to shrimp
farmers, hurting the domestic shrimp harvesters.
191
The ITC declined to
impose antidumping duties at that time. But in 2003 the Sou th ern
Shrimp Alliance filed another petition seeking antidumping duties
against shrimp from six countries: Brazil, China, Ecuador, India,
Thailand, and Vietnam.
192
182. Farmed Salmon, World Wildlife Fund, http://www.worldwildlife.org/industries/
farmed-salmon [http://perma.cc/LF5R-SJ2W] (last visited Oct. 11, 2017).
183. Keithly & Poudel, supra note 181, at 459.
184. See id. at 463–64 (explaining that increased farmed-shrimp production coincides
with a decline in shrimp prices and suggesting that aquaculture production is responsible
for that decline).
185. Id. at 463.
186. Id.
187. UN Food & Agric. Org., The State of World Fisheries and Aquaculture 23 tbl.6
(2016), http://www.fao.org/3/a-i5555e.pdf [http://perma.cc/LGC5-8TNP] [hereinafter
State of World Fisheries 2016] (indicating that, of the approximately 74 million metric
tons of global aquaculture production, Asia is responsible for approximately 66 million
metric tons, or roughly 89%).
188. See Simon Worrall, Q&A: Explaining the Decline of American Seafood, Nat’l
Geographic (July 12, 2014), http://news.nationalgeographic.com/news/2014/07/140713-
fish-susta inable-fisheries-oysters-tilapia-seafood-oceans-shrimp-food/ [http://perma.cc/RQK6-
PPME] (“90 percent of [American] shrimp is imported, the majority of it from Asia.”).
189. See, e.g., Keithly & Poudel, supra note 181, at 468.
190. Id. at 468.
191. Id.
192. Id. at 469.
524 COLUMBIA LAW REVIEW [Vol. 118:491
In 2005, following an investigation, the United States imposed anti-
dumping duties against the six countries. In its finding, the ITC empha-
sized two points about the imports. First, the ITC noted that “[i]mports
from subject countries include both farmed and wild-caught warmwater
shrimp. However, production of farmed warmwater shrimp plays a much
more important role in subject country production than in U.S.
production.”
193
Second, the ITC found that foreign shrimp producers benefit from
“substantial government assistance.”
194
Offsetting this government sup-
port seems to have been at least part of the motive for the 2005 U.S. anti-
dumping duties on shrimp. These antidumpin g duties alone produced
four WTO disputes.
195
The growth, and government support, of aquaculture have thus
driven trade remedies cases and associated WTO disputes. Beyond
shrimp and salmon, the United States and the European Union have im-
posed trade remedies on Vietnamese catfish,
196
Chinese crawfish tails,
197
193. Warmwater Shrimp Investigation, supra note 162, at II-4.
194. Id. (“[S]ubject country governments have been active in assisting the growth of
their warmwater shrimp industries, using subsidies, loans, prohibitively high tariffs on
imports . . . , government efforts in research and development and in developing a seed
stock . . . for farms, government aid in response to [shrimp] epidemics . . . , and training.”).
195. In two of these cases, Thailand challenged the provisional application of duties in
2004 and the final application in 2005, ultimately pursuing only the latter (in a case not
initiated until 2006). See supra notes 163, 166. The core challenge in most of these cases—
won by the complainants—was to the U.S. method of “zeroing.” See Index of Disputes
Issues, WTO, http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm
[http:perma.cc/7DAJ-QKW7] (last visited Oct. 30, 2017) (listing many of these fisheries
disputes as disputes about zeroing). Zeroing is a controversial method for calculating
dumping margins. It involves setting negative dumping margins on products subject to
investigation (that is, those products not being dumped) to zero, and then averaging them
with products subject to investigation that yield positive dumping margins. For instance, if
farmed shrimp is being dumped at a margin of $2 per pound, that means it is being sold at
$2 below “normal value.” If captured shrimp is sold at a dumping margin of -$2 per
pound, that means it is being sold at $2 more than normal value, and hence is not being
dumped. Averaging these two products, since they compete, would yield a dumping
margin of zero (assuming they are sold in the same quantity). A zeroing methodology,
however, requires you to treat the dumping margin on captured shrimp as $0, rather than
-$2. The effect of this technique is to increase dumping margins in investigations that
involve “like” products, some of which are being dumped and some of which are not.
Another of these cases involved a challenge to a U.S. order imposing enhanced bonding
requirements on “agriculture/aquaculture merchandise” subject to antidumping duties
(in practice, only the imported shrimp). See Panel Report, United States—Customs Bond
Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties, para. 2.2,
WTO Doc. WT/DS345/R (adopted Feb. 29, 2008).
196. Antidumping Duty Order: Certain Frozen Fish Fillets from the Socialist Republic
of Vietnam, 68 Fed. Reg. 47,909, 47,909 (Aug. 12, 2003); see also Certain Frozen Fish
Fillets from the Socialist Republic of Vietnam: Final Results of Antidumping Duty New
Shipper Review; 2014–2015, 81 Fed. Reg. 44,272, 44,273 (July 7, 2016) (confirming
antidumping duties on Vietnamese frozen fish fillets after a review).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 525
Norwegian trout,
198
and Turkish trout,
199
among others. Trade disputes
centered on wild-caught fish are conspicuously absent.
Despite all this activity surrounding aquaculture, governments have
not formally challenged one another’s considerably more extensive sup-
port for wild fisheries. To be sure, the WTO has been the site of more
comprehensive efforts to deal with government support for wild fisheries.
Indeed, the regulation of fisheries subsidies has been a hot topic in trade
negotiations since the 1980s.
200
During the Uruguay Round, which led to
the creation of the WTO, countries debated how best to regulate fisher-
ies subsidies.
201
Ultimately, they elected to exclude fisheries from the
Agreement on Agriculture.
202
Fisheries subsidies are governed, though,
by the general subsidy rules in the SCM Agreement.
203
This fact alone
makes the absence of wild-fisheries challenges puzzling. Nations wish to
reform fisheries subsidies, but are unwilling to use existing rules and the
dispute-settlement process to do so.
204
* * *
Energy and fish are two of the most important sectors of the global
economy. Not surprisingly, they both benefit from substantial govern-
197. Notice of Amendment to Final Determination of Sales at Less than Fair Value
and Antidumping Duty Order: Freshwater Crawfish Tail Meat from the People’s Republic
of China, 62 Fed. Reg. 48,218, 48,219 (Sept. 10, 1997).
198. Council Regulation 437/2004 of Mar. 8, 2004, Imposing Definitive Anti-Dumping
Duty and Collecting Definitively the Provisional Duty Imposed on Imports of Large
Rainbow Trout Originating in Norway and the Faeroe Islands, 2004 O.J. (L 72) 23, 38
(EC).
199. Comm ission Implementing Regulation 1195/2014 of Oct. 29, 2014, Imposing a
Provisional Countervailing Duty on Imports of Certain Rainbow Trout Originating in
Turkey, 2014 O.J. (L 319) 1, 29 (EU); see also Eva Tallaksen, Turkish Trout Exporters
Could Face 7–10% Anti-Dumping Duties to EU, Undercurrent News (Oct. 15, 2014),
http://www.undercurrentnews.co m/2014/1 0/15/turkish-trout-exporters-could-face-7-
10-anti-dumping-duties-to-eu/ (on file with the Columbia Law Revie w) (noting that Turkish
trout producers would be assessed countervailing duties on their rainbow trout after a
finding that Turkey had subsidized those producers).
200. A number of international organizations have worked on fisheries subsidies
issues, including not only the WTO but also the Food and Agriculture Organization of the
United Nations, the Organization for Economic Co-operation and Development, and Asia-
Pacific Economic Cooperation. For a comprehensive discussion of the interaction among
these various efforts at reform, see Young, supra note 144, at 85–133.
201. See id. at 70–73 (discussing the structure of the WTO agreements and the
decision to constrain the use of subsidies).
202. Id. at 52, 73.
203. Id. at 73–74, 91–93.
204. The Doha Roun d of negotiatio ns, which began in 20 00 and continues slowly
today, includes a mandate to “clarify and improve WTO disciplines on fisheries
subsidies.” WTO, Ministerial Declaration of 14 November 2001, para. 28, WTO Doc.
WT/MIN(01)/DEC/1, 41 ILM 746, 750 (2002). Despite this mandate, a broad consensus
that some form of additional regulation is necessary, a number of proposals from leading
WTO members, and fifteen years of negotiations, an agreement has proved elusive.
526 COLUMBIA LAW REVIEW [Vol. 118:491
ment support, some of which runs afoul of global trading rules. Yet,
bizarrely, those trade rules are enforced against only a subset of products
within each industry. Traditional natural resources—fossil fuels and wild
fish—are left alone. Natural resource substitutes—renewable energy and
farmed fish—are targeted over and over again. This Article does not
claim that government support for natural resource substitutes is or
should be lawful. Nor does it argue that these cases are by themselves
unfair. Rather, its claim is that fairness is a relative concept when prod-
ucts compete in the marketplace. Enforcing trade laws against products
with the potential to reduce consumption-imposed environmental bur-
dens, but not against competing products whose consumption harms the
environment, ultimately hurts efforts to develop and promote environ-
mentally friendly products. The following Part takes up this claim in
detail.
III.
HOW SELECTIVE ENFORCEMENT OF TRADE LAWS HURTS
ENVIRONMENTAL PRODUCTS
The traditional fear about selective enforcement has been that it will
confer an unfair advantage on some nations at the expense of others. In
so doing, selective enforcement will undermine certain values that many
would like to see the trade regime further, or at least not undermine,
such as environmental protection, labor rights, or economic develop-
ment. This Part unpacks how selective enforcement of trade law can
inhibit, rather than promote, competition—a core economic value. In
the commercial context, selective enforcement can distort the develop-
ment of product markets. Even worse, when products have broader social
costs and benefits, such as environmental externalities, these distortions
do more than simply affect the welfare of firms and consumer choice.
They can create market failures, leading products with significant social
costs to capture greater market share than they would in the presence of
evenhanded enforcement. Selective enforcement of trade rules thus
creates a paradox. In enforcing rules designed to keep markets free and
open, selective enforcement can actually create or exacerbate market
failures.
Section III.A describes how selective enforcement benefits products
not targeted for enforcement at the expense of those products that are
targeted. Se ction III.B considers how competitive the relationship
between two products has to be for selective enforcement to create
market distortions. Section III.C explains the social costs of selective
enforcement that protects natural resource consumption.
A. The Financial Costs of Selective Enforcement
Selective enforcement creates costs that some market participants,
but not others who are similarly situated, must bear. These costs create a
market advantage for those firms not targeted for enforcement. This
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 527
advantage, the result of government action, is an implicit subsidy. And by
distorting competition, selective enforcement can affect how markets
function, with far-reaching effects for both market participants and
society as a whole. Selective enforcement produces at least three costs:
litigation costs, liability, and lost investment. These costs are generaliza-
ble to selective enforcement in any commercial context, not just
international trade law. This section unpacks these costs, which Part IV
will discuss more concretely.
1. Litigation Costs. — First, and most obviously, defendants must
bear the cost of defending themselves in litigation. These costs can be
significant. Bringing or defending a WTO dispute, much less participat-
ing in WTO disputes on a regular basis, can tax the resources of any
country.
205
In a survey of WTO members, 88% of respondents said that
legal capacity is the single most important factor distinguishing the most
powerful WTO members from run-of-the-mill members.
206
The most
powerful countries are better able to afford the “high cost of WTO litiga-
tion” and benefi t from “greater private sector support.”
207
Most coun-
tries, on the other hand, struggle to marshal the resources necessary to
protect their rights in WTO dispute settlement. For these countries, the
risk of becoming a respondent in a WTO action is a significant one, to be
avoided if at all possible.
The same point applies to individual producers that might be tar-
geted by trade remedies investigations. Trade remedies investigations do
not target nations but rather focus on individual companies. Those com-
panies are entitled to contest the imposition of trade remedies against
them.
208
Doing so is more burdensome for targeted foreign producers
than it is for the domestic producers that seek their government’s
protection via trade remedies. Foreign producers must bear the cost and
inconvenience of contesting legal proceedings in a foreign country, often
in part by hiring expensive foreign counsel. These costs can be especially
burdensome for relatively new producers or industries that are challeng-
ing incumbent producers. Indeed, the costs of contesting trade remedies
205. See Busch et al., supra note 60, at 560–61 (documenting the burdens of the WTO
dispute settlement process); Guzman & Simmons, supra note 53, at 583, 591 (finding
evidence that capacity to bear the significant costs of trade disputes affects developing
countries’ litigation decisions).
206. Busch et al., supra note 60, at 567.
207. Id. (internal quotation marks omitted).
208. See, e.g., Craig A. Lewis, Jonathan T. Stoel & Brian S. Janovitz, The United States
Court of International Trade in 2010: Is Commerce Suffering from Adverse Decisions It
Wasn’t Double-Counting On?, 43 Geo. J. Int’l L. 47, 50 (2011) (noting that the Court of
International Trade’s docket “remains overwhelmingly dominated by appeals contesting
the issuance and administration of trade remedies”).
528 COLUMBIA LAW REVIEW [Vol. 118:491
investigations, both at the national and international levels, have led
countries to avo id dispute resolution for most trade remedies.
209
2. Liability. — Second, defendants may have to bear financial liabil-
ity or other penalties if a tribunal finds they have acted unlawfully or
engaged in “unfair” trade practices. Defendants may also spend more on
precautionary measures in the future than those market participants that
do not believe they are likely targets for enforcement action.
210
In this
way, selective enforcement is a “force multiplier” for similarly situated
producers that do not expect to be challenged. Producers that might be
challenged incur costs to avoid liability even if they are never challenged.
In the context of international trade rules on government support,
two particular forms of liability are worth discussing in further detail:
withdrawn government support and higher duties on imports.
a. Withdrawn Government Support. — Unsurprisingly, enforcement of
WTO rules against government financial support can neutralize the ef-
fects of that support. This can occur in several ways. First, in cases
brought to the WTO’s Dispute Settlement Body, reports (that is, deci-
sions) against the respondent come with a recommendation that the re-
spondent government bring itself into compliance with the DSB’s
decision.
211
A losing respondent should thus remove its unlawful financial
support, or at least modify the measure to make it consistent with WTO
rules.
Of course, the effect of such a ruling is to reduce government sup-
port for the relevant domestic industry. For example, in 2014, the United
States agreed to replace most of its subsidies to cotton farmers with an
insurance system.
212
The United States did so to comply with a WTO
209. Chad P. Bown, Trade Remedies and World Trade Organization Dispute
Settlement: Why Are So Few Challenged?, 34 J. Legal Stud. 515, 518–24 (2005)
[hereinafter Bown, Trade Remedies] (explaining the costs of challenging a trade remedy
at the WTO and suggesting countries may be choosing antidumping retaliation in lieu of
formal dispute resolution).
210. See, e.g., Robert Cooter, Unity in Tort, Contract, and Property: The Model of
Precaution, 73 Calif. L. Rev. 1, 2–3 (1985) (analyzing how the common law establishes
incentives for actors to take precautionary measures); Charles D. Kolstad, Thomas S. Ulen
& Gary V. Johnson, Ex Post Liability for Harm vs. Ex Ante Safety Regulation: Substitutes or
Complements?, 80 Am. Econ. Rev. 888, 890–91 (1990) (discussing theories of optimal
liability and precaution in the presence of uncertainty about how a court will view the
defendant’s actions).
211. See DSU, supra note 54, art. 19. Under the Dispute Settlement Understanding,
an initial panel hears the dispute, makes factual determinations, and applies relevant
WTO agreements to determine whether the respondent has in fact violated its WTO
obligations. See id. art. 11. The losing party may appeal to the WTO’s Appellate Body,
which reviews the panel’s determination. See id. art. 17. Both the panel’s and the
Appellate Body’s decisions become binding on the parties unless all WTO members—
including the prevailing party—agree otherwise. See id. arts. 16.4, 17.14.
212. Notification of a Mutually Agreed Solution, United States—Subsidies on Upland
Cotton, WTO Doc. WT/DS267/46 (Oct. 23, 2014).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 529
decision finding that U.S. cotton subsidies caused adverse effects to
Brazilian cotton producers and were, in some cases, prohibited.
213
Similarly,
the United States, the European Union, and Canada challenged certain
measures China applied to imported automobile parts as violations of,
inter alia, the SCM Agreement.
214
After losing, China repealed the of-
fending measures.
215
If the respondent declines to remove the measure, the complainant
can obtain authorization to retaliate.
216
Retaliation takes the form of sus-
pending concessions—in other words, imposing trade barriers that the
complainant had otherwise agreed to remove—to get the respondent to
remove its unlawful measure.
217
The complainant has significant discre-
tion in how it retaliates. For example, it may try to suspend concessions
that hurt the recipients of government support in an effort to encourage
those recipients to ask the government to stop supporting them.
218
Alternatively, the losing party in a WTO subsidy dispute might end
up paying foreign producers to avoid sanctions. Brazil initially won its
challenge to U.S. cotton subsidies in 2005.
219
The United States agreed in
2010 to pay Brazilian cotton farmers $147.3 million per year to avoid
other retaliatory penalties.
220
While U.S. cotton farmers continued to
receive subsidies, the U.S. government’s payment to Brazilian farmers—
effectively forcing U.S. tax payers to subsidize Brazilian cotton growers—
reduced the advantage of U.S. subsidies.
213. See Appellate Body Report, United States—Subsidies on Upland Cotton, paras.
4–5, 763–764, WTO Doc. WT/DS267/AB/R (adopted Mar. 3, 2005) [hereinafter United
States—Cotton].
214. Neither the panel nor the Appellate Body actually reached the SCM claim, as the
measures were found to violate the (simpler) national treatment rule found in GATT
Article III. See Appellate Body Reports, China—Measures Affecting Imports of
Automobile Parts, paras. 253–254, WTO Docs. WT/DSB339/AB/R, WT/DS340/AB/R,
WT/DS342/AB/R (adopted Dec. 15, 2008).
215. Id.
216. See DSU, supra note 54, art. 22 (discussing “[c]ompensation and the suspension
of concessions” as retaliatory measures available to complaining members).
217. Id.
218. See id. art. 22.3 (describing the general principles guiding a successful
complainant’s decision as to which concessions to suspend); see also Decision by the
Arbitrators, European Communities—Measures Concerning Meat and Meat Products
(Hormones), para. 18, WTO Doc. WT/DS26/ARB (July 12, 1999) (determining that a
respondent may challenge only the “level” of suspended concessions, not the “nature” of
the concessions the complainant chooses to suspend).
219. See United States—Cotton, supra note 213, paras. 763–764.
220. Editorial, U.S.–Brazil Cotton Deal Perpetuates an Unhealthy Status Quo of
Subsidies, Wash. Post (Oct. 7, 2014), http://www.washingtonpost.com/opinions/us-brazil-
cotton-deal-perpetuates-an-unhealthy-status-quo-of-subsidies/2014/10/07/d8346bf4-4b 2a-
11e4-891d-713f052086a0_story.html?utm_term=.d51c542c0adf (on file with the Columbia
Law Review).
530 COLUMBIA LAW REVIEW [Vol. 118:491
b. Higher Duties on Natural Resource Substitutes. — Trade remedies
provide the second way that governments can neutralize the effect of
government support. Antidumping duties (or countervailing duties) are
designed to offset unfair trade practices. They can thus be set up to the
amount needed to offset the unfair practice (either the “margin of
dumping” or the amount of the subsidy).
221
Moreover, because trade remedies are essentially higher tariffs, they
are paid by the very producers that otherwis e would have charged lower
prices.
Those higher prices, in turn, can reduce the market share of the
imported product. For example, a production subsidy might allow a
Chinese producer of solar panels to sell its products for $100 less per
panel in the United States than it would otherwise have to charge. The
Chinese producer might therefore be able to sell more of its products.
Moreover, cheaper solar panels would lead to more solar power and
therefore fewer greenhouse gas emissions—a social benefit shared by the
community as a whole, not only the purchaser of the solar panel. But if
the United States imposes countervailing duties on Chinese solar panels,
nullifying the $100 subsidy, the price goes back up. The Chinese pro-
ducer now fails to capture greater market sh are, fewer solar panels are
sold overall, and the environment does not benefit from the emissions
reductions that attend cheaper solar power.
Equally importantly, a government need not seek the WTO’s per-
mission before resorting to trade remedies.
222
Instead, a government may
impose trade remedies after determining, through a domestic investiga-
tion, that such remedies are justified.
223
In the United States, for exam-
ple, the Department of Commerce and the International Trade
Commission conduct these investigations;
224
in the European Union, the
European Commission does.
225
If the exporting government feels that
the importing government has imposed trade remedies unlawfully, the
221. See GATT, supra note 36, art. VI.2 (“In order to offset or prevent dumping, a
contracting party may levy on any dumped product an anti-dumping duty not greater in
amount than the margin of dumping . . . .”); id. art. VI.3 (“No countervailing duty shall be
levied on any product . . . in excess of an amount equal to the estimated bounty or
subsidy . . . .”).
222. See id. art. VI.2–.3 (granting parties the right to impose antidumping and
countervailing duties).
223. See id. art. VI.6 (requiring states to determine that dumping or subsidization has
caused or threatened “material injury” to a domestic industry).
224. Jay Charles Campbell, The Trade Litigant’s Gauntlet: The Hanging Judge and
the Teflon Tribunal, 31 Nw. J. Int’l L. & Bus. 1, 3 (2011).
225. See Wentong Zheng, Reforming Trade Remedies, 34 Mich. J. Int’l L. 151, 179 &
n.151 (2012) (noting the European Commission’s investigative role in advance of trade
remedies).
2018] FREE TRADE AND SELECTIVE ENFORCEMENT 531
exporting government can bring a case to the WTO Dispute Settlement
Body.
226
Trade remedies have this protectionist effect by design. They are, in
effect, a safety valve to ensure that governments can protect certain
domestic industries from the effects of unfair foreign competition.
227
Governments’ responding to unfair trade practices is not in and of itself
problematic. The difficulty, it bears rep eating, is the selective way in
which they do so. When disputes systematically target only one set of
actors benefitting from the unfair trade practice, then the enforcement
policies the mselves have become unfair and, if the targeted set of actors
produces a great social benefit, socially harmful.
228
3. Lost Investment and Higher Costs of Capital. — Litigation costs and
liability lead to the third, and most important, cost of selective enforce -
ment in the trade context: decreased investment and increased costs of
capital, which together further erode profitability and can slow innova-
tion. To see how selective enforcement deters investment, notice that
litigation and liability costs increase the minimum price a producer must
charge to break even. If money coming in goes back out the door in
response to enforcement efforts, bus inesses cannot use it to settle other
debts, make further investments in their business, or simply to take a
profit. If they continue to charge the same prices despite additional
enforcement-related costs, they lose profitability. If they raise prices, they
risk losing market share to less expensive competitors.
This reduction in profits can create a vicious cycle. Investors direct
money to firms that make profits. Increased costs reduce profits and
therefore reduce investors’ willingness to put money behind a firm. This
investor reluctance itself translates into higher costs of capital. If profits
are lower, a firm may have to offer more—for example, it may have to
pay higher interest rates—in order to attract the funds it needs to sup-
port its operations. These increased costs of capital decrease the firm’s
profitability, making it more difficult to attract capital, and so on.
Critically, the targeted firms’ similarly situated competitors—those
that engage in or benefit from the same allegedly unlawful conduct but
against whom the law is not enforced—come out ahead. They do so in
two ways. First, they do not bear the direct litigation and liab ility costs
that the targeted entities bear. They do, however, continue to benefit
from the allegedly unlawful conduct. In thi s way, selective enforcement acts
like an implicit subsidy for those who are not targeted. The costs of engaging in
226. Reid M. Bolton, Anti-Dumping and Distrust: Reducing Anti-Dumping Duties
Under the W.T.O. Through Heightened Scrutiny, 29 Berkeley J. Int’l L. 66, 66–67 (2011).
227. Cf. Alan O. Sykes, Protectionism as a “Safeguard”: A Positive Analysis of the
GATT “Escape Clause” with Normative Speculations, 58 U. Chi. L. Rev. 255, 273 (1991)
(noting that the GATT “escape clause” “legitimates protection” for domestic industries).
228. See infra section III.C.
532 COLUMBIA LAW REVIEW [Vol. 118:491
behavior deemed advantageous from a business perspective is lower for
those firms that avoid enforcement.
Competitors who avoid enforcement also may gain access to cheaper
capital. Investors looking to gain in a particular sector may shift their
investments from companies targeted for enforcement to those not so
targeted. Greater access to capital may allow firms that predictably avoid
enforcement to expand their operations, taking advantage of greater
economies of scale or capturing additional market share. It may also
allow them to negotiate lower interest rates than those available to their
targeted competitors.
Two examples from outside the world of international trade illus-
trate the general point. First, rules requiring lenders to maintain a cer-
tain amount of capital on hand to cover debts gone bad are enforced
against traditional banks, but not against so-called “shadow banks.”
229
As
a result, shadow banks have captured a significant share of the market for
loans to small and mid-market businesses.
230
Selective enforcement of
rules on capital adequacy thus protect and benefit shadow banks at the
expense of traditional banks.
Second, consider tobacco litigation in the United States. In the
1990s, state attorneys general reached what is known as the Master
Settlement Agreement (MSA) with major tobacco companies such as
Philip Morris and R.J. Reynolds.
231
The MSA required the major tobacc o
companies to make payments to the states to settle their liability for
state tobacco-related health expenditures.
232
The MSA also imposed re-
strictions on certain business practices, such as advertising tobacco prod-
ucts to youth.
233
Notably, however, the MSA only applied to those tobacco
producers targeted for enforcement by the states. Small-scale tobacco
producers were exempted from enforcement, and hence the financial
229. See Sridhar Natarajan, The SEC’s Beef with Shadow Banks Could Be Bad for
Some Businesses, Bloomberg (Oct. 26, 2016), http://www.bloomberg.com/news/articles/
2016-10-26/shadow-banks-on-wall-street-turf-confront-sec-on-lending-rules (on file with the
Columbia Law Review) (discussing an SEC proposal to impose capital constraints against
shadow banks, as well as traditional banks).
230. Id. These loans are riskier than loans to large corporations and thus harder to
make for traditional banks that are subject to capital constraints. Id.
231. See W. Kip Viscusi, Tobacco: Regulation and Taxation Through Litigation, in
Regulation Through Litigation 22, 46–48 (W. Kip Viscusi ed., 2002) (describing the
Master Settlement Agreement); see also Tobacco Control Legal Consortium, The Master
Setlement Agreement: An Overview 1 (2015), http://www.publichealthlawcenter.org/
sites/default/files/resources/tclc-fs-msa-overview-2015.pdf [http://perma.cc/KH9E-T352].
232. Viscusi, supra note 231, at 48–50.
233. Charles King III & Michael Siegel, The Master Settlement Agreement with the
Tobacco Industry and Cigarette Advertising in Magazines, 345 New Eng. J. Med. 504, 504
(2001).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 533
and advertising restrictions imposed by the settlement.
234
In the after-
math of the MSA, a number of these small producers thrived, contributing
to a declining market share for the big tobacco companies.
235
B. What Kind of Relationship Between Products Makes Selective Enforcement
Pernicious?
Selective enforcement in trade law is unfair only if it disadvantages a
competitor. Selective enforcement of environmental and labor laws gives
a country a competitive advantage over countries that evenly and robustly
enforce their laws. Selective enforcement against weak countries gives
strong countries an advantage by allowing them to flout trade law to a
greater degree. Likewise, the selective enforcement of trade laws is unfair
only if it harms some product’s chance to compete in the market. But
how similar do two products have to be for this harm to arise?
The United States appears to take the position that products must be
very similar for trade enforcement to affect competitive opportunities. In
2016, the United States prevailed in a WTO case against India challeng-
ing India’s National Solar Mission on the grounds that it contained a lo-
cal content requirement.
236
In discussing the United States’ victory at the
panel stage, U.S. Trade Representative Michael Froman stated:
[T]he Obama Administration is committed to strengthening
the clean energy sector and the millions of jobs it supports here
in America and all over the world. Trade enforcement is critical
for ensuring that world-class U.S. clean energy goods and
services can compete on an equal footing around the
world . . . .
237
When Froman talks about “competing on an equal footing,” he as-
sumes that the American renewable energy sector competes primarily
with the Indian renewable energy sector (and perhaps the renewable en-
ergy sectors of other countries, such as China) in the Indian market. In
drawing such a tight compar ison, Froman is following the letter of inter-
national trade law. In bringing a discrimination claim, for instance, a
complainant must first demonstrate that the product receiving prefer-
ential treatment and the one being discriminated against are “like.”
238
234. Martha A. Derthick, Up in Smoke: From Legislation to Litigation in Tobacco
Politics 202–03 (2002).
235. Id.
236. India—Solar Cells and Modules, supra note 112, para. 6.4.
237. Press Release, Office of the U.S. Trade Representative, United States Prevails in WTO
Dispute Challenging India’s Discrimination Against U.S. Solar Exports (Feb. 24, 2016),
http://ustr.gov/ about-us/policy-offices/ press-office/press-releases/2016/february/united-
states-prevails- wto-dispute [http://perma.cc/VTK3-BLCE].
238. See Appellate Body Report, Japan—Taxes on Alcoholic Beverages, 18–19, WTO
Doc. WT/DS8/AB/R, WT/DS10/AB/R, WT/DS411/AB/R (adopted Oct. 4, 1996)
534 COLUMBIA LAW REVIEW [Vol. 118:491
Likeness is a narrower relationship than merely a competitive relation-
ship in the marketplace.
239
Indeed, the WTO Appellate Body has
described substitutability in the marketplace as only one factor relevant
to an assessment of likeness, alo ng with factors such as a product’s
physical characteristics and its tariff classifications.
240
As a consequence,
farmed fish and wild fish of the same species might be treated as like
products in a trade case, but renewable energy products and fossil
fuels—which surely compete with each other—would almost certainly
not be.
But this assumption is unwarranted. The American renewable
energy sector competes not only with the Indian renewable energy sector
but also with the fossil fuel sector. A report from the International
Institute for Sustainable Development, entitled How Subsidies for Kerosene
Are Holding Back Solar Power in India, makes the point clear.
241
Millions of
rural households in India rely on kerosene for lighting.
242
The report
notes that:
Off-grid solar technologies, such as solar lanterns and solar
home systems, can effectively replace kerosene use for lighting
in rural areas that are unserved (or poorly served) by the
electricity grid, and are likely to be so for some time. Solar can
provide safer and better quality lighting, and is also friendly to
the environment.
243
Yet solar has not been a successful replacement for kerosene in off-
grid co mmunities, in large part due to subsidies for kerosene.
244
The
study finds that under current conditions over a two-year period, house-
holds lose money by shifting to solar products.
245
Solar becomes the
better option, however, if kerosene subsidies are zeroed out.
246
Subsidies
for kerosene, in other words, have allowed it to gain greater market share
at the expense of solar. This market impact, in turn, has significant nega-
[hereinafter Japan—Alcohol] (noting the importance of determining “whether the taxed
imported and domestic products are ‘like’”).
239. See id. at 21.
240. Id. at 25.
241. Vibhuti Garg, Shruti Sharma & Kieran Clarke, How Subsidies for Kerosene Are
Holding Back Solar Power in India, Int’l Inst. for Sustainable Dev.: Glob. Subsidies
Initiative (July 11, 2016), http://www.iisd.org/gsi/news/how-subsidies-kerosene-are-holding-
back-solar-power-india [http://perma.cc/L5BC-J8TL].
242. Id.
243. Id.
244. Id.
245. Id.
246. Id. One might argue that the Indian government could eliminate government
support for both fossil fuels and renewables. In the short term, this is likely impractical for
domestic political reasons. More importantly, though, it neglects the impact of
international fossil fuel subsidies, which are beyond India’s ability to control.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 535
tive healt h consequences for kerosene users in addition to the broader
environmental impacts of fossil fuel consumption.
247
This example highlights the centrality of the competitive relation-
ship between products. If two products are substitutes in the market,
removing subsidies for one but not the other will hamper competition.
Trade lawyers have understood this point since the earliest days of the
GATT. In 1950, Chile challenged Australia’s de cision to remove a war-
time subsidy on sodium nitrate.
248
Chile had negotiated with Aust ralia for
duty-free entry of its sodium nitrate at a time at which Australia had
wartime subsidies on both sodium nitrate and its competitor, ammonium
sulphate.
249
A GATT Working Party (a predecessor to the more formal
dispute process in existence today) found that Australia’s action harmed
Chile’s legitimate expectations.
250
By removing the subsidy on sodium
nitrate and not on ammonium sulphate, Australia had unfairly dis-
advantaged it against its (still subsidized) competitor.
Economists refer to the strength of the competitive relationship be-
tween two products as the cross-elasticity of demand.
251
Technically, the
cross-elasticity of demand measures how demand for one product
changes in response to a change in the price of another product, holding
the price of the first good constant.
252
Cross-elasticities of demand are
commonly used in antitrust law to determine the “relevant market”—
that is, to define legally significant competitive relationships among
products.
253
In economic terms, selective enforcement becomes more pernicious
the higher the cross-elasticity of demand between two products.
254
The
reason is straightforward. If a product has few close substitutes and the
demand for a product is inelastic, producers can pass along price
increases to the consumer. Hence, if a product has relatively inelastic
demand, the costs discussed above—litigation, liability, and lost invest-
ment—will not affect a product’s bottom line. But as a demand becomes
more elastic, consumers will purchase less of the product as these costs
247. Id.
248. Working Party Report, The Australian Subsidy on Ammonium Sulphate, paras. 2–
6, GATT/CP.4/39 (adopted Apr. 3, 1950), GATT BISD at 188, 189–91 (2003).
249. Id.
250. Id. para. 12.
251. See, e.g., 62B Am. Jur. 2d Private Franchise Contracts § 71 (2018) (“[C]ross-
elasticity of demand may be defined as the extent to which purchasers will accept
substitute products in the event of price fluctuations and other changes.”).
252. Gregory J. Werden, The History of Antitrust Market Delineation, 76 Marq. L. Rev.
123, 130 (1992).
253. See id. (describing the Supreme Court’s use of cross-elasticity in market
delineation).
254. Id. at 131 (“[A] high cross-elasticity indicates close substitutes.” (internal
quotation marks omitted) (quoting Joe S. Bain, Price Theory 52 (1952))).
536 COLUMBIA LAW REVIEW [Vol. 118:491
force producers to raise prices. If the product has a high cross-elasticity
of demand with another product, consumers will substitute that second
product for the newly more expensive original one. In this way, one pro-
ducer’s loss is another producer’s gain. In the kerosene--solar example
discussed above, consumers purchase less solar (and more kerosene) as
the price of kerosene falls in response to subsidies.
255
The idea of cross-elasticities of demand also illustrates the problem
with Froman’s focus on competition exclusively among renewable
energy, namely that he is looking at an incomplete set of competitive re-
lationships.
256
Consider three products: American solar panels, Indian
solar panels, and fossil fuels. For simplicity, American solar panels sell in
India for $30 a panel. Indian solar panels would also sell for $30
unsubsidized, but the effect of India’s subsidy is to allow the panels to sell
for $20. Subsidized kerosene necessary to produce an equivalent amount
of energy sells for $25, but would sell for $35 unsubsidized. The United
States’ success at the WTO may succeed in removing the Indian subsidy
for Indian solar panels. Doing so would make American and Indian solar
panels competitive with each other. But the effect would also be to de-
crease the purchase of solar panels—American or Indian—by redirecting
purchases to kerosene. Subsidized kerosene, after all, remains cheaper at
$25 than solar power at $30.
257
Of course, as Froman notes, his concern is not with the overall share
of renewable energy versus fossil fuels; he is concerned specifically with
the share of the market that American solar producers capture.
258
In the
simple example above, consumers willing to pay an extra $5 for clean
energy will now be more likely to purchase American solar pa nels as
opposed to Indian solar panels. The incidental benefit to fossil fuels may
be, in Froman’s view, beside the point. But this effect matters if the
notion of “fair trade” encompasses values beyond liberalized trade.
C. The Social Costs of Selective Enforcement
Critically, selective enforcement of trade law has its worst effects
when targeted products have social benefits beyond those captured by
producers, while similarly situated, untargeted products have social costs.
In these circumstances, selective enforcement reinforces a market failure.
The theory of externalities demonstrates why this occurs. In general,
free markets work well because freely determined prices carry
255. See supra notes 241–247 and accompanying text.
256. See supra notes 237–238 and accompanying text.
257. One could formalize the exact size of this effect more precisely by imagining the
cross-elasticity of demand between kerosene and solar energy. The basic point, however, is
made clear by this simple example.
258. See supra text accompanying note 238.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 537
information about how much society values a product or activity.
259
This
assumes, however, that private market participants capture the entire
social value of a transaction. If they do not, then market prices will not
reflect the true social cost or benefit of a product or service.
260
Since Ronald Coase introduced the problem of social costs in
1960,
261
law and economics scholars have argued that a key purpose of
the law is to get private actors to take into account these broader social
costs and benefits of their transactions.
262
In economic terms, the law
should encourage private actors to internalize the externalities created
by their actions. In the context of subsidies, this has generally meant two
things. First, governments should not subsidize products that have signif-
icant social costs. Government support for these two sectors keeps prices
artificially low, increasing consumption and thereby increasing the over-
all costs on society. For exactly this reason, environmentally minded
people have supported policy goals that reduce or eliminate subsidies for
fossil fuels and wild fishing.
263
Because of governments’ failures to elimi-
nate these subsidies, the market produces and consumes more fossil fuels
and wild fish than it would without subsidies.
264
Second, and by contrast, law and economics scholars have argued
that governments should financially support products that have social
benefits.
265
The producers of such products do not capture the benefits
259. See, e.g., Donald J. Boudreaux, Information and Prices, The Concise Encyclopedia
of Economics, Library of Econ. & Liberty, http://www.econlib.org/library/Enc/
InformationandPrices.html [http://perma.cc/A6YN-FJCF] (last visited Oct. 30, 2017)
(discussing the role of prices in conveying information about social preferences).
260. See Dennis W. Carlton & Alan S. Frankel, Transaction Costs, Externalities, and
“Two-Sided” Payment Markets, 2005 Colum. Bus. L. Rev. 617, 622–23 (“Externalities arise
when the private cost facing a buyer or seller differs significantly from the social cost.”).
261. R.H. Coase, The Problem of Social Cost, 3 J.L. & Econ. 1, 40–42 (1960).
262. See Robert Cooter, Prices and Sanctions, 84 Colum. L. Rev. 1523, 1523, 1535
(19
84)
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internalize the complete costs of their actions).
263. See, e.g., Allison Kirsch & Timmons Roberts, The Ghosts of Resolutions Past:
The G20 Agreement on Phasing Out Inefficient Fossil Fuel Subsidies, Brookings Inst.:
Planet Policy (Nov. 14, 2014), http://www.brookings.edu/blogs/planetpolicy/posts/2014/
11/14-g20-fossil-fuel-subsidie s-kirsch-roberts [http://perma.cc/A65Z-VAEC] (discussing
government promises to phase out fossil fuel subsidies); see also Young, supra note 144, at
6 (discussing efforts to reform subsidies for wild fisheries).
264. Indeed, many argue that a tax further raising the cost of fossil fuels is necessary to
align the price of fossil fuels with their total social good. See, e.g., Carlton & Frankel, supra
note 260, at 622 (“By taxing pollution or charging highway tolls in amounts equal to the
social costs imposed by these activities, regulators can theoretically correct these market
failures.”).
265. See, e.g., Timothy Meyer, How Local Discrimination Can Promote Global Public
Goods, 95 B.U. L. Rev. 1937, 1969 (2015) [hereinafter Meyer, Local Discrimination]
(discussing how discriminatory measures like local content requirements can correct the
undersupply of global public goods).
538 COLUMBIA LAW REVIEW [Vol. 118:491
from their products. Because producers of such products do not capture
the resulting benefits, they will underproduce relative to what would be
socially desirable.
266
Subsidies, by increasing the value of producing envi-
ronmentally sustainable products, can ensure that environmentally sus-
tainable (or otherwise socially desirable) products appear in the market
in greater numbers. This approach to subsidization has long justified
subsidies for basic research into infrastructure, medicine, and tech-
nology---including renewable energy technology---for which the initial
market benefits may be too small to justify private investment despite
significant potential social benefits from innovation
Trade rules by and large do not reflect this economic theory of sub-
sidies. The SCM Agreement initially contained provisions permitting
certain kinds of beneficial subsidies, but those provisions expired in
2000.
267
Since then, WTO rules have not distinguished among subsidies
based upon their purpose.
268
Many have called for the reauthorization of
so-called “green light” subsidies for environmental products.
269
To date,
though, no action has been taken on this suggestion.
270
WTO members
are currently negotiating an Environmental Goods Agreement, but the
negotiations do not cover any subsidies rules.
271
Moreover, while govern-
ments have regularly agreed to reform environmentally harmful
266. See id. (explaining why governments “undersupply public goods” when they
create benefits outside of the relevant jurisdiction).
267. See SCM Agreement, supra note 10, arts. 8, 31 (explaining that green light
subsidies expire five years after the SCM Agreement enters into force).
268. See Young, supra note, 144, at 6 (noting the disputes surrounding attempts to
reform the SCM Agreement to incorporate environmental objectives by distinguishing
between harmful and beneficial subsidies). Indeed, as Professor Margaret Young notes,
discussions over subsidies for wild fisheries have struggled in part because of the need to
distinguish harmful from beneficial subsidies. Some fisheries subsidies, such as subsidies
for larger fleets, have negative consequences, while others, such as support for retraining,
have environmental benefits by reducing the number of fish caught. See id.
269. See, e.g., Mark Wu, E15 Initiative, Re-Examining ‘Green Light’ Subsidies in the
Wake of New Green Industrial Policies 10 (2015), http://e15initiative.org/wp-
content/uploads/2015/07/E15_Industrial-Policy_Wu_F INAL.pdf [http://perma.cc/M9HU-
FUGN] (discussing “how Article 8 might be reconstituted for those who desire its
reintroduction”).
270. See Agreement on Subsidies and Countervailing Measures (“SCM Agreement”),
WTO, http://www.wto.org/english/tratop_e/scm_e/subs_e.htm [http://perma.cc/E7VV-
PMZ2] (last visited Oct. 11, 2017) (noting only two categories of subsidies: prohibited and
actionable).
271. Environmental Goods Agreement (EGA), WTO, http://www.wto.org/english/
tratop_e/envir_e/ega_e.htm [http://perma.cc/G2GL-3AYH] (last visited Oct. 11, 2017)
(noting that negotiations are limited to “seeking to eliminate tariffs on a number of
important environment-related products”).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 539
subsidies, including both fisheries and fossil fuels, action has been
relatively slow.
272
The result is a selective enforcement policy that compromises not
only the value of fair competition but also the public’s interest in markets
that produce socially responsible products. It bears noting that selective
enforcement will not always have these larger costs. If selective enforce-
ment disadvantages a run-of-the-mill competing product, the policy may
merely be inefficient. But natural resource scarcity has become one of
the central issues of the twenty-first century.
273
It is imperative to identify
and develop products that can replace scarce natural resources. A trade
policy that actively harms that interest by reinforcing the market position
of natural resources and natural resource–intensive products is, like the
consumption of the natural resources themselves, ultimately unsus tainable.
* * *
While trade rules may not distinguish between subsidies based on
their social costs and benefits, enforcement of trade rules should at least
aim to do no harm. Enforcement policies could, of course, focus on
those subsidies that are harmful. Doing so would mimic the effect of the
SCM’s expired “green light” subsidy provisions. Instead, through litiga-
tion costs, liability, and the knock-on effect of lost investment and higher
capital costs, enforcement policies counteract the effect of environmen-
tally sustainable subsidies while leaving in place environmentally harmful
subsidies. In other words, selective enforcement operates as an implicit
subsidy for environmentally harmful incumbent products like fossil fuels
and wild fisheries. The next Part turns to the way that subsidy works.
IV.
SELECTIVE ENFORCEMENT IN ENERGY AND FISHERIES
Environmentally sustainable products are often new products, pred-
icated on technological innovation, that seek to compete with and
ultimately replace incumbent, natural resource–intensive products. En-
couraging this competition through government support can have
beneficial consequences. Instead, as this Part demonstrates, the selective
272. See Oby Ezekwesili, Why We Need to End Fisheries Subsidies, World Econ. F.
(Oct. 2, 2015), http://www.weforum.org/agenda/2015/10/why-we-need-to-end-fisheries-
subsidies/ [http://perma.cc/8K64-9SMU] (“Nearly 60% of the WTO’s membership
supports controlling fisheries subsidies . . . .”); Karl Mathiesen, G7 Nations Pledge to End
Fossil Fuel Subsidies by 2025, Guardian (May 27, 2016), http://www.theguardian .com/
environment/2016/may/27/g7-nations-pledge-to-end-fossil-fuel-subsidies-by-2025 [http://
perma.cc/4SR8-FU9Z] (quoting Shelagh Whitley of the Overseas Development Institute as
saying that “[w]e already see [some in] the G7 going in the wrong direction since Paris”
but “[j]ust because they are saying this [about fossil fuel subsidies], it’s not a fait accompli”
(alterations in original) (internal quotation marks omitted)).
273. See Harlan Grant Cohen, International Law in a Time of Scarcity: An
Introduction, 42 Ga. J. Int’l & Comp. L. 1, 1–6 (2013) (discussing how international law
responds to increasingly scarce natural resources).
540 COLUMBIA LAW REVIEW [Vol. 118:491
enforcement of trade laws places innovative environmentally friendly
products at a competitive disadvantage. This Part makes concrete the
harms theorized in Part III, first in the energy sector (section IV.A) and
then in the fisheries sector (section IV.B). Each section begins by discuss-
ing evidence that government support is necessary to help sustainable
products compete with natural resource–intensive products. This Part
then turns to evaluating the effects of some of the individual cases dis-
cussed in Part II, demonstrating that they resulted in litigation costs and
lost government support.
A. The Effects of Selective Enforcement in Energy
Reducing the consumption of fossil fuels and meeting increasing
energy demand through renewable energy are imperative if the world is
to avoid the most catastrophic effects of global climate change.
274
In
order to achieve this goal, public officials and experts have repeatedly
called for greater innovation and investment in order to close the gap
between renewables and fossil fuels. In May 2016, for instan ce, govern-
ment officials in charge of energy policy convened for the Clean Energy
Ministerial in San Francisco.
275
The energy ministers in attendance dis-
cussed plans to achieve the goals established by the Paris Agreement on
Climate Change, including by “spurring companies to develop new,
cleaner technologies.”
276
Former U.S. Energy Secretary Ernest Moniz em-
phasized the importance of government support in this task, saying, “I
think the government role is often undersold in the way it permeates
across our innovation system.”
277
British Secretary Ed Davey has touted
his government’s investments in renewable energy in response to “an
historic legacy of underinvestment and neglect that threatened to un-
dermine the whole economy.”
278
Social science studies have confirmed the important role of public
policy in supporting private innovation in renewables. Nick Johnstone,
Ivan Haščič, and David Popp have found that “[govern ment] [i]nvestment
in renewable energy sources—wind, solar, geothermal, ocean, biomass,
274. See Intergovernmental Panel on Climate Change, supra note 68, at 208
(“Without additional efforts to reduce [greenhouse gas] emissions beyond those in place
today, global emissions growth is expected to persist driven by growth in global population
and economic activities.”).
275. Energy Secretary Ernest Moniz Says Government Can Help Clean Energy
Innovation, NPR (May 29, 2016), http://www.npr.org/2016/05/29/479942451/energy-
secretary-ernest-moniz-says-government-can-help-clean-energy-innovation (on file with the
Columbia Law Review).
276. Id.
277. Id.
278. Press Association, Investment in UK Renewable Energy Sector Almost £8bn in
2013, Guardian (July 17, 2014), http://www. theguardian.com/business/2014/jul /17/
investment-uk-renewable-energy-sector-8bn [http://perma.cc/6ERW-DNN3].
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 541
and waste-to-energy—can significantly contribute to the realization of
public environmental objectives.”
279
The need for investment in renewa-
bles, including from the government, stems from the uncertainties
attached to developing and deploying new energy technologies.
Investments in new technology may not pay off, and the returns on those
investments depend in critical part on fossil fuel prices. Low fossil fuel
prices give electricity generators and consumers little reason to switch to
renewables.
As Carolyn Fischer and Richard Newell note, a “production subsidy
for renewable energy improves the competitiveness of these sources vis-à-
vis fossil fuels” by reducing their production costs and therefore boosting
profits.
280
Subsidies for renewable energy can “reduce[] the risk of invest-
ments and offer[] a secure basis” for companies to innovate and expand
capacity.
281
Innovation and expansion are key for a sector trying to
compete with the established fossil fuel industry, which has had years to
invest in infrastructure and develop economies of scale.
Despite the critical role of government support for clean energy
innovation, selective enforcement has only reinforced the market posi-
tion of fossil fuels. Both aggregate data on energy subsidies and the
outcomes of individual trade disputes demonstrate this fact. 2009 is a
useful benchmark for comparing the effects of selective enforcement on
global energy subsidies.
282
As discussed in Part II, the pattern of selective
enforcement in the energy sector began in earnest that year, with renew-
ables becoming the subject of trade cases while fossil fuels remained
beyond the reach of trade authorities.
283
As a consequence, trade law has
not led to any reduction in fossil fuel subsidies and, indeed, fossil fuel
subsidies have continued to benefit from generous government support.
Start with the aggregate data. We would like to know counterfactu-
ally if, absent selective enforcement, the ratio between fossil fuel subsi-
dies and renewable energy subsidies would be more favorable to
renewable energy than it is currently. That is, would renewable energy
subsidies be higher or fossil fuel subsidies lower? Given their environ-
mental benefits, one might hypothesize that renewable energy subsidies
would grow at a faster rate over time, causing the ratio to adjust in favor
of renewable energy. The public good that renewable energy subsidies
279. Nick Johnstone, Ivan Haščič & David Popp, Renewable Energy Policies and
Technological Innovation: Evidence Based on Patent Counts, 45 Envtl. & Resource Econ.
133, 134 (2010).
280. Carolyn Fischer & Richard G. Newell, Environmental and Technology Policies for
Climate Mitigation, 55 J. Envtl. Econ. & Mgmt. 142, 144 (2008) (emphasis omitted).
281. Ger Klaassen, Asami Miketa, Katarina Larsen & Thomas Sundqvist, The Impact of
R&D on Innovation for Wind Energy in Denmark, Germany and the United Kingdom, 54
Ecological Econ. 227, 229 (2005) (emphasis omitted).
282. See supra section II.A.
283. See supra section II.A.
542 COLUMBIA LAW REVIEW [Vol. 118:491
create, in terms of reducing greenhouse gas emissions, lowers the real
cost of such subsidies. Conversely, the environmental externalities cre-
ated by fossil fuels raise the real cost of fossil fuel subsidies.
In fact, however, we see the opposite pattern. Fossil fuel subsidies
have maintained their ratio vis-à-vis renewable energy subsidies and, in
absolute dollar terms, have grown faster. Fossil fuel subsidies can be
divided into tw o kinds: subsidies for production and subsidies for con-
sumption.
284
The International Energy Agency (IEA) estimates that from
2009 to 2014, fossil fuel consumption subsidies increased from $300
billion per year
285
to $490 billion.
286
Indeed, fossil fuel consumption
subsidies peaked at approximately $550 billion in both 2012 and 2013.
287
Declining fuel prices accounted for the drop in subsidies from 2013 to
2014, ra t her than a change in government policies regarding support for
fossil fuel consumption.
288
In terms of production subsidies, experts esti-
mate that in 2014, the G20 alone provided $444 billion in fossil fuel
production subsidies.
289
Taken together, then, total fossil fuel subsidies in
2014 reached, at a minimum, $934 billion.
290
Subsidies have also increased on the renewable side of the ledger,
though fossil fuel subsidies continue to dwarf renewable subsidies. In
2009, renewable energy subsidies—including subsidies for both con-
sumption and production—totaled $60 billion.
291
In 2014, they totaled
284. This distinction is a bit artificial, although it is commonly used in the literature. A
subsidy for production can, of course, spur consumption by lowering prices. Likewise, if
structured properly a consumption subsidy can spur production to meet increased
demand.
285. Int’l Energy Agency, World Energy Outlook 2011, at 508 (2011), http://www.iea.org/
publications/freepublications/publication/WEO2011_WEB.pdf [http://perma.cc/8W88-
H4N7] [hereinafter World Energy Outlook 2011].
286. Int’l Energy Agency, World Energy Outlook 2015, at 27 (2015), http://www.iea.org/
publications/freepublications/publication/WEO2015.pdf [http://perma.cc/Y2EM-YXYG]
[hereinafter World Energy Outlook 2015].
287. Int’l Energy Agency, World Energy Outlook 2013, at 25 (2013), http://www.iea.org/
publications/freepublications/publication/WEO 2013.pdf [http://perma.cc/ZS26-L36S];
Int’l Energy Agency, World Energy Outlook 2014, at 320 (2014), http://www.iea.org/
publications/freepublications/publication/WEO2014.pdf [http://perma.cc/PTS7-VJGP].
288. See World Energy Outlook 2015, supra note 286, at 98. Moreover, the IEA
estimates that consumption subsidies would have been $610 billion in 2014 without
reforms enacted following the 2009 pledge by the G20 to phase out fossil fuel subsidies. Id.
at 27. Given the effect of declining prices on subsidy levels, however, skeptics wonder
whether the pledge has had any real effect on policy. Kirsch & Roberts, supra note 263.
289. Elizabeth Bast, Alex Doukas, Sam Pickard, Laurie van der Burg & Shelagh
Whitley, Overseas Dev. Inst. & Oilchange Int’l, Empty Promises: G20 Subsidies to Oil,
Gas and Coal Production 11 (2015), http://priceofoil.org/content/uploads/2015/11/
empty_promises_full_report_update.pdf [http://perma.cc/P3NM-ALJN].
290. See id. (noting that G20 governments provide $444 billion per year in fossil fuel
production subsidies); World Energy Outlook 2015, supra note 286, at 27 (estimating $490
billion in fossil fuel consumption subsidies).
291. World Energy Outlook 2011, supra note 285, at 508.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 543
approximately $135 billion.
292
Despite this growth, the ratio of renewable
energy subsidies to fossil fuel subsidies has remained relatively stable over
these five years. In 2009, the IEA reports that fossil fuel consumption
subsidies were five times renewable energy subsidies ($300 billion to $60
billion).
293
That ratio came down slightly, with fossil fuel consumption
subsidies 3.6 times the size of all renewable energy subsidies in 2014
($490 billion
294
compared to $135 billion
295
). Using the combined
estimate of both consumption and production subsidies above ($934
billion), fossil fuels received approximately seven times the amount of
subsidies today that renewables received in 2014. Moreover, in absolute
terms, renewable energy subsidies increased by only $75 billion, while
fossil fuel consumption subsidies alone (not including production
subsidies) increased by $190 billion.
This evidence demonstrates a correlation between selective
enforcement and a discrepancy in government support for renewable
energy—a discrepancy that governments themselves have pledged to
close by reducing fossil fuel subsidies.
296
To be sure, this aggregate data is
not conclusive evidence of the impact of selective enforcement. Selective
enforcement is surely not the only cause of this policy failure. The power
of the fossil fuel lobby and downstream industries that benefit from
cheap fuels plays an important role. But part of the way in which lobby-
ing affects subsidies policies is through the kinds of trade cases govern-
ments bring. And selective enforcement does demonstrably reduce the
availability of government support for renewable energy. Starting in
2009, governments have exclusively brought trade cases challenging gov-
ernment support in the energy sector against renewable energy. During
that same period, absolute support for fossil fuels grew approximately
two and a half times as much as support for renewable energy ($190
billion compared to $75 billion).
297
Beyond aggregate data on subsidies, one can see the direct impact of
selective enforcement by looking at the effects of some cases discussed in
Part II. Consider the impact of the Canada—Renewables case. There, the
European Union and Japan challenged Ontario’s Feed-in Tariff Program
292. World Energy Outlook 2015, supra note 286, at 343.
293. World Energy Outlook 2011, supra note 285, at 508. Confusingly, the IEA
typically compares only consumption subsidies for fossil fuels to all renewable energy
subsidies. Id.
294. World Energy Outlook 2015, supra note 286, at 27.
295. Id. at 343.
296. Leaders’ Stat ement, The Pittsburgh Summit, para. 24 (Sept. 24–25, 2009), http://
www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_
leaders_statement_250909.pdf [http://perma.cc/V8ZZ-6M8F] (committing G20 governments
to “phase out and rationalize over the medium term inefficient fossil fuel subsidies”
(emphasis omitted)).
297. See supra notes 291–295 and accompanying text.
544 COLUMBIA LAW REVIEW [Vol. 118:491
as violating the WTO’s subsidies rules, as well as discriminating against
foreign products in violation of the national treatment rule found in the
GATT and the Agreement on Trade-Related Investment Measures.
298
A
feed-in tariff is a program that guarantees electricity producers, in this
case those generating electricity from renewable sources, a certain rate.
299
These rates are set high enough to encourage investment in a sector in
which it might not otherwise be profitable to invest.
300
The EU and Japan ultimately prevailed on the discrimination
claim.
301
In response, Ontario canceled its feed-in tariffs for all large pro-
jects.
302
Ontario did leave its feed-in tariff in place for smaller pro-
grams.
303
The province capped the program’s availability, however, and
cut the rates it paid these smaller programs by 25% to 39%.
304
The sub-
sidy for investing in renewable energy came in the form of guaranteed
higher rates, so the combination of eliminating the program for large
projects and cutting rates for those projects that remain amounts to a
dramatic reduction in government support for renewable energy in
Ontario.
The long-term effects of the sudden cancellation of the feed-in tariff
remain to be seen. On the positive side, at least some renewable energy
equipment producers seem to have taken advantage of the Feed-in Tariff
Program while it existed to become profitable without government sup-
port.
305
Establishing such producers and then weaning them off govern-
ment support as they become cost-competitive is the ideal for programs
298. Canada—Renewables Appellate Body Report, supra note 14, paras. 1.6–1.7.
299. Feed-in Tariffs, Nat’l Renewable Energy Lab., http://www.nrel.gov/technical-
assistance/basics-tariffs.html [http://perma.cc/BU92-2ARN] (last visited Oct. 30, 2017).
300. Id.
301. Canada—Renewables Appellate Body Report, supra note 14.
302. Communication from Canada, Canada—Certain Measures Affecting the
Renewable Energy Sector, WTO Docs. WT/DS412/19, WT/DS426/19 (June 6, 2014)
[hereinafter Communication from Canada]; see also Gipe, supra note 14. In theory,
Canada could have simply eliminated the local content requirements that the WTO found
discriminatory and otherwise continued its program. As Canada’s communication to the
WTO indicated, however, the Ontario legislature was unsuccessful in amending the
legislation governing the feed-in tariff. See Communication from Canada, supra, at 1. As I
have argued elsewhere, this kind of stalemate is likely, especially at the subnational level.
Discriminatory conditions are often necessary to pass green subsidies. Without the
discriminatory subsidy, the subsidy vanishes entirely. See Meyer, Local Discrimination,
supra note 265, at 1942.
303. Communication from Canada, supra note 302; Gipe, supra note 14.
304. Christian Roselund, Ontario Reduces Feed-in Tariffs 1--5% for Solar PV, PV Mag.
(Oct. 8, 2014), http://www.pv-magazine.com/news/details/beitrag/ontario-reduces-feed-
in-tariffs-1-5-for-solar-pv_100016734/#axzz4CEx0myiW [http://perma.cc/4E9Y-8Y5J].
305. See Peter Kuiten brouwer, Ontario Solar Industry Finds Place in the Sun After Green
Energy Flameout, Fin. Post (Dec. 28, 2015), http://business.financialpost.com/investing/outlook-
2016/ontario-solar-industry-finds-place-in-the-sun-after-green-energy-debacle?__lsa=1542-1445
(on file with the Columbia Law Review) (last updated Jan. 4, 2016).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 545
like Ontario’s Feed-in Tariff Program. On the other hand, though, these
producers have become export focused, targeting foreign markets like
the United States that still have incentives in place for renewable en-
ergy.
306
Those Ontario producers thus continue to rely on government
incentives in order to be competitive. This fact has led critics to fear that
the absence of the feed-in tariff endangers Ontario’s own long-term tran-
sition to renewable energy.
307
The United States’ WTO case challenging discriminatory Chinese
subsidies for wind power provides another case in point. Following the
filing of the case, China agreed to remove its subsidies, which “could
[have] collectively total[ed] several hundred million dollars” between
2008 and 2011.
308
Just as in Ontario, however, industry experts speculated
that at least several firms had used the subsidies to become sufficiently
competitive to survive without the subsidies.
309
Indeed, Chinese subsidies
and the cheap wind power they make available are in part responsible for
the growth in wind energy in other countries, including the United
States.
310
Trade restrictions on biofuels offer a third case in point. Biofuels
compete directly with fossil fuels. Ethanol and biodiesel can substitute for
fossil fuels, or blend into gasoline and diesel fuels.
311
As the price of oil
falls, traders consume fewer biofuels because blending becomes less cost-
effective. The long-term relationship between the two also affects energy
consumers’ fuel choices.
Like other forms of renewable energy, biofuels have been criticized
as not cost competitive with fossil fuels. Writing in Forbes, Jude Clemente
argues that “[a] major hurdle to [the ] commercialization of biofuels is
306. Id. (quoting Ontario solar panel producers as having “adjusted our strategy as a
result of the U.S. tax incentives” after Ontario cancelled the Feed-in Tariff Program
(internal quotation marks omitted)).
307. See, e.g., Leah Stokes, Opinion, Ontario’s Backward Step on Renewable Energy,
Toronto Star (July 22, 2013), http://www.thestar.com/opinion/commentary/2013/07/
22/ontarios_backward_step_on_renewabl e_energy.html [http://perma.cc/LGS6-J94N].
308. Palmer & Walet, supra note 114.
309. Id. (quoting an investment analyst as saying that “Chinese wind power companies
have reached a stage that, regardless of subsidies, they will head out and aim for overseas
markets if there are opportunities” (internal quotation marks omitted)).
310. See, e.g., Wind Energy Globally on the Rise: Policies Drive Growth in China, the
US and Germany, UN Framework Convention on Climate Change (Aug. 19, 2015),
http://newsroom.unfccc.int/clean-energy/policies-drive-wind-energy-growth-in-china-the-
us-and-germany/ [http://perma.cc/FN4F-GXZ4] (highlighting the growth in wind power
in the United States, Germany, and Europe more broadly).
311. See Alternative Vehicle Fuels, EPA, http://www.epa.gov/greenvehicles/alternative-
vehicle-fuels [http://perma.cc/6NJE-PGZ4] (last updated Oct. 24, 2016).
546 COLUMBIA LAW REVIEW [Vol. 118:491
their cost in comparison to petroleum-based fuels.”
312
He notes that
between 2008 and 2022, biofuels are expected to receive approximately
$400 billion in subsidies.
313
As noted above, subsidies for fossil fuels ex-
ceed this amount in a single year.
314
This fact makes the cost-competitive-
ness argument against biofuel subsidies difficult to sustain.
Yet just as subsidies for solar and wind have been under attack, so
too has government support for biofuels. As discussed in Part II,
Argentina and the EU have engaged in a trade war at the WTO over bio-
diesel. In 2008, the EU issued rules requiring that 10% of land transport
energy come from biofuels by 2020.
315
This rule stimulated investment in
biofuels, including biodiesel, within Europe. European producers, how-
ever, found themselves losing market share to foreign producers. Decid-
ing that the loss of market share stemmed from dumping and illegal
subsidies, the European Union imposed antidumping and countervailing
duties on U.S. biodiesel in 2009.
316
Filling the void left by U.S. biodiesel,
Indonesian and Argentinian shares of the European market rose from
9.1% in 2009 to 19.3% in 2012.
317
The European Biodiesel Board, an industry group, responded by
filing a complaint with the European Commission, which then launched
both antidumping and countervailing-duty investigations.
318
In 2013, the
EU imposed antidumping duties on biodiesel producers from both
countries.
319
The crux of the complaint against Argentina was that it
maintained a selective export tax.
320
In short, Argentina had an export
tax on soy and soybeans, used to make biodiesel, that was higher than the
export tax on th e biodiesel itself.
321
Preferential tax treatment of this
kind is often viewed as a financial contribution by a government.
322
In
this case, Argentina provided financial support to biodiesel producers by
312. Jude Clemente, Why Biofuels Can’t Replace Oil, Forbes (June 17, 2015),
http://www.forbes.com/sites/judeclemente/2015/06/17/why-biofuels-cant-replace-
oil/#8b81ed6f60f7 [http://perma.cc/WD4B-3SP5].
313. Id.
314. See supra notes 285–287 and accompanying text.
315. Jonathan Stearns, Argentina, Indonesia Hit with EU Tariffs on Biodiesel,
Bloomberg Tech. (Nov. 19, 2013), http://www.bloomberg.com/news/articles/2013-11-
19/argentina-indonesia-hi t-with-eu- tariffs-on-biodiesel (on file with the Columbia Law
Review).
316. Id.
317. Id.
318. Panel Report, European Union—Anti-Dumping Measures on Biodiesel from
Argentina, para. 7.179, WTO Doc. WT/DS473/R (adopted Oct. 26, 2016) [hereinafter
EU—Biodiesel].
319. Council Implementing Regulation 1194/2013, supra note 15, at 2–26.
320. EU—Biodiesel, supra note 318, para. 7.180.
321. Id.
322. See SCM Agreement, supra note 10, art. 1 (discussing how revenue otherwise
foregone, such as tax breaks, can qualify as a financial contribution by a government).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 547
foregoing the higher tax rates on soybeans in favor of the lower tax rates
on biodiesel. This selective tax system meant that Argentinian biodiesel
producers could acquire the goods—soybeans—necessary to make bio-
diesel for less than European producers could. The EU imposed anti-
dumping duties in response. In March 2016, the WTO ruled that the EU
had improperly calculated the “dumping margin”—the extent to which
pricing deviates from “normal”—because of how it treated the selective
export tax.
323
Despite this ruling, the effect of the EU’s antidumping duties on the
Argentinian biodiesel sector has been profound. In 2013, Argentina
exported only one third of the amount of biofuels to Europe that it had
sold there in 2011 and 20 12.
324
Some Argentine producers had stopped
production at the end of 2012 and large exporters found that 60% of
their production capacity lay idle.
325
The Argentine Biofuels and
Hydrogen Association estimates that Argentinian biofuel production fell
by more than 30% from 2014 to 2015, while exports fell by an astonishing
55%.
326
Exports recovered in 2016 with the opening of the U.S. market to
Argentinian biofuels.
327
But two new trade conflicts now threaten the
Argentine biofuel sector’s resurgence. In late 2016, Peru—Argentina’s
second largest export market—slapped antidumping duties on
Argentinian biofuels, claiming that the fuel was unlawfully subsidized by
the Argentinian government.
328
In August 2017, the United States—
Argentina’s largest export market—imposed significant preliminary
countervailing duties on Argentinian biofuels.
329
Prior to the imposition
323. EU—Biodiesel, supra note 318, paras . 7.20, 8.1.c.
324. Carlos Manzoni, La Industria Local de Biodiésel Trata de Salvarse con el
Mercado Interno [The Local Biodiesel Industry Tries to Save Itself with the Internal
Market], La Nacion (Nov. 10, 2013), http://www.lanacion.com.ar/1636787-la-industria-
local-de-biodiesel-trata-de-salvarse-con-el-mercado-interno [http://perma.cc/R3BB-C53H].
325. Some speculate that the drought and subsequent soy scarcity contributed to, if
not caused, the biofuel production halt in 2012 and 2013. Biodiesel Argentina Noticias,
supra note 15.
326. Charles Ne wb ery, Argentina Raises Biodies el Prices, Export Taxes, Platts (Feb.
16, 2016), http://www.platts.com/latest-news/agricul tu re /buenosaires/argentina-raises-
biodiesel-prices-e xport-taxes-263699 43 [http://perma.cc/ZY9S-2UH4].
327. Maximilian Heath, Argentina Biodiesel Exports Surge as Sales to U.S. Grow,
Reuters (Sept. 6, 2016), http://www.reuters.com/article/arge ntina-biodie sel-id USL1N1BI16Z
[http://perma.cc/NPG5-ANZS]. The United States was estimated to have received 75% to
80% of Argentina’s 2016 exports. Id.
328. Meghan Sapp, Peru Accuses Argentina of Dumping Biodiesel, Biofuels Dig. (Apr.
21, 2016), http://www.biofuelsdigest.com/bdigest/2016/04/21/peru-accuses-argentina-of-
dumping-biodiesel/ [http://perma.cc/T2G9-SS86].
329. Press Release, U.S. Dep’t of Commerce, U.S. Department of Commerce Issues
Affirmative Preliminary Countervailing Duty Determinations on Biodiesel from Argentina and
Indonesia (Aug. 22, 2017), http://www.commerce.gov/news/press-releases/2017/08/us-
548 COLUMBIA LAW REVIEW [Vol. 118:491
of these duties, the head of Argentina’s biodiesel trade association had
worried that “[i]f a sanction i s app lied against Argentina in the U.S.
market, our exports will no longer be viable. At this point, there is no
alternative market.”
330
Following the United States’s imposition of duties,
Argentinian producers halted exports to the United States.
331
Taken together, these cases demonstrate the powerful impact that
selective enforcement can have. In Canada, China, and Argentina, gov-
ernments and industry groups have incurred litigation costs defending
themselves against trade claims. They have also incurred significant liabil-
ity. The governments of Ontario and China have been forced to
withdraw green subsidies, a significant loss for the renewable sector.
Argentinian biofuel producers have been forced to pay higher duties in
all of their major export markets, cutting into their profits and poten-
tially rendering the entire industry nonviable.
Yet the kind of subsidies for renewable energy challenged here are
necessary simply to create a level playing field with the heavily subsidized
fossil fuel industry. Fossil fuel companies benefit from substantial gov-
ernment support without suffering any consequences under the interna-
tional trade regime. Fossil fuel prices can be lower and company profits
higher because of these subsidies. Renewable subsidies continue to lag
behind fossil fuel subsidies, despite the beneficial environmental impacts
of such subsidies. Moreover, renewable subsidies have been reduced, and
their effectiveness undercut, by trade enforcement. While this enforce-
ment might well improve competitiveness among renewable energy
sources, it severely disadvantages renewable energy against its primary
competition, fossil fuels.
B. The Effects of Selective Enforcement in Fisheries
Investment in innovation is as important for fisheries as it is for en-
ergy. Seafood is the most highly traded food commodity in the world.
332
Wild fisheries cannot continue to produce sufficient fish to feed the
world’s population.
333
Preserving fish stocks thus means either reducing
department-of-commerce-issues-affirmative-preliminary-countervailing-1 [http://perma.cc/
AR2Q-VEAG].
330. Maximiliano Rizzi, Dumping Complaint Could Kill Argentine Biodiesel Exports,
Groups Says [sic], Reuters (Mar. 31, 2017), http://www.reuters.com/article/us-usa-
biodiesel-argentina/dumping-complaint-could-kill-argentine-biodiesel-exports-groups-says-
idUSKBN1722HP [http://perma.cc/7BBB-HH2K].
331. Maximilian Heath, Argentina Bets on European Biodiesel Market After U.S.
Imposes Duties, Reuters (Aug. 23, 2017), http://www.reuters.com/article/us-
argentina-biodiesel/argentina-bets-on-european-biodiesel-market-after-u-s-imposes-
duties-idUSKCN1B32QL [http://perma.cc/BZ3L-GC24].
332. Terazono, Salmon Leaps Past Shrimp, supra note 141.
333. See State of World Fisheries 2016, supra note 187, at 5–6.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 549
the worldwide consumption of fish (unlikely) or developing alternative
means of satisfying the world’s need for fish.
The FAO reports that as of 2013, 31.4% of the world’s fisheries are
overfished, meaning that the level of fishing is biologically unsustaina-
ble.
334
Another 58.1% are fully fished, meaning that they “have no poten-
tial for increases in production.”
335
One of the most dire predictions,
published in the journal Science, is that stocks of all species currently
fished for food will collapse by 2048 if fis hing practices do not change.
336
Consequently, capture fisheries are unlikely to be able to satisfy the
global demand for fish.
This limitation has spurred the dramatic growth in aquaculture.
Global aquaculture production grew at an average annual rate of 8.6%
from 1983 to 2012.
337
By contrast, global harvesting of wild fish peaked in
1996 and has been flat or declining since then.
338
Wild harvest in
countries that are members to the Organization for Economic
Cooperation and Development (OECD) declined 15% between 2005 and
2015 and 39% since its peak in 1988.
339
In 2015, 80% of global aquacul-
ture production was located in just five countries: China, India, Vietnam,
Indonesia, and Bangladesh.
340
By contrast, the top five OECD produc-
ers—Norway, Chile, Japan, South Korea, and the United States—
accounted for only 6% of global production.
341
In 2014, humans con-
sumed more farmed fish than wild-caught fish for the first time ever.
342
Although some have hailed aquaculture as a possible way to relieve
the strain on wild fish stocks,
343
the environmental benefits of contempo-
rary aquaculture are mixed in practice. First, fish production from the
wild continues to exceed fish production from aquaculture due to wild
fish that are used as feed for farmed fish.
344
Hence, current aquaculture
334. Id. at 38.
335. Id. at 6, 38.
336. Boris Worm et al., Impacts of Biodiversity Loss on Ocean Ecosystem Services, 314
Science 787, 790 (2006).
337. Org. for Econ. Cooperation & Dev., OECD Review of Fisheries: Policies and
Summary Statistics 2015, at 16 (2015) [hereinafter OECD 2015].
338. Id. at 14.
339. Id.
340. Id. at 10.
341. Id.
342. Emiko Terazono, Farmed Fish on Course to Overtake Wild Catch in 2019, Fin.
Times (May 28, 2017), http://www.ft.com/content/43f83044-421a-11e7-9d56-25f963e998b2
(on file with the Columbia Law Review) (“Farmed fish became the chief source of fish
consumed by humans in 2014.”).
343. See, e.g., Farmed in the EU, European Comm’n, http://ec.europa.eu/fisheries/
inseparable/en/farmed-eu [http://perma.cc/EF4M-XEUB] (last updated Jan. 25, 2018)
(“Fish farming, or aquaculture, can help to relieve this burden on wild fishes when it
comes to satisfying our ever growing demand for fish . . . .”).
344. OECD 2015, supra note 337, at 16.
550 COLUMBIA LAW REVIEW [Vol. 118:491
practices—and consumers’ taste for carnivorous fish such as shrimp and
salmon—actually create demand for certain wild-caught fish, even as
aquaculture satisfies demand for other wild-caught fish. Second, natural
habitats are often destroyed to make way for fish farms.
345
The loss of
mangrove forests, which have suffered severe declines in the Asian
countries where they are predominantly located, is perhaps the most
commonly cited environmental harm arising from aquaculture.
346
Other
risks include the release of chemicals or antibiotics used to clean fish
farms into the general water supply, the release of waste, and the
introduction of farmed fish into the wild in ways that disrupt local
ecosystems (if, for example, they are non-native).
347
The long-term viability of fish as a source of human food, as well as
the potential for aquaculture to relieve the strain on capture fisheries
without causing additional environmental damage, thus depends on in-
vestment and innovation. As the Economist put it, “By boosting basic
research and infrastructure for aquaculture, governments could hasten a
welcome trend.”
348
Governments and international organizations have recognized this
need. In 2015, the OECD launched its “Fisheries and Aquaculture
Innovation Platform” (FAIP).
349
FAIP aims to collect data on nations’
efforts to support innovation for both wild catch fisheries and aquacul-
ture.
350
Similarly, the FAO has argued that “a lack of technical innovation”
345. See J.H. Primavera, Overcoming the Impacts of Aquaculture on the Coastal Zone,
49 Ocean & Coastal Mgmt. 531, 533 (2006) (describing the destruction of mangrove
forests, estuaries, and tidal creeks to make way for fish ponds and cages).
346. See id. at 534 (“Mangrove conversion to shrimp ponds is the single major factor
that has contributed to the negative press received by aquaculture.”).
347. See id. at 535–37 (listing and discussing the environmental risks of aquaculture).
348. Net Positive: How to Stop Overfishing on the High Seas, Economist (J uly 16,
2016), http://www.economist.com /news/leaders/21702196-how-stop-overfishing-high-seas-
net-positive (on file with the Columbia Law Review) (“So in parallel with efforts to protect
wild stocks, another push is needed: to encourage the development of aquaculture . . . .”).
349. See About the Platform, Fisheries and Aquaculture Innovation Platform (FAIP),
Org. for Econ. Cooperation & Dev., http://www.oecd.org/fisheries-innovation/about/
[http://perma.cc/AN36-EMK9] (last visited Oct. 11, 2017).
350. See Towards Innovation, Fisheries and Aquaculture Innovation Platform (FAIP),
Org. for Econ. Cooperation & Dev., http://www.oecd.org/fisheries-innovation/towards-
innovation/ [http://perma.cc/Z5CN-283R] (last visited Oct. 11, 2017). More specifically,
FAIP attempts to estimate both the percent of government fisheries’ spending devoted to
research and development, as well as the level of patenting activity in different countries.
See id. Patenting activity is broken down into three categories: (1) harvesting or fisheries-
technology patents (also called wild-catch patents), (2) aquaculture-technology patents,
and (3) patents in new products and markets. See Data, Fisheries and Aquaculture
Innovation Platform (FAIP), Org. for Econ. Cooperation & Dev., http://www.oecd.org/
fisheries-innovation/data/ [http://perma.cc/SB5M-HZK6] (last visited Oct. 11, 2017).
Interestingly, large developed economies like the United States, Canada, and the United
Kingdom produce many more harvesting patents, while countries like Norway and China
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 551
constrains aquaculture development, especially among the small-scale
producers that are prevalent in Asia and Africa.
351
Individual nations have placed a similar emphasis on investment and
innovation. For example, in June 2016 the Canadian Council of Fisheries
and Aquaculture Ministries (a group composed of the Canadian federal
and provincial fisheries and aquaculture ministers) released an
“Aquaculture Development Strategy” designed to capitalize on “aquacul-
ture’s potential to create jobs, economic growth and prosperity in
remote, rural, coastal and Indigenous communities.”
352
The Strateg y
noted the ministers’ view that “[i]nvestment in innovation and scientific
research is required to support further development of this important
industry. Investment in these areas will foster continual improvement in
environmental sustainability and economic viability while increasing
public confidence. ”
353
Bangladesh provides another case in point. With the assistance of
the FAO, Bangladesh released a “National Aquaculture Development
Strategy and Action Plan” for 2013 to 2020.
354
The report notes that
Bangladesh has become the fifth-largest producer of aquaculture prod-
ucts in the world, with its farmed fish supply increasing by more than
200% during the first decade of the twenty-first century.
355
In the report,
Bangladesh argues that aquaculture can fulfill a number of important
strategic objectives, including assuring food and nutrition security and
creating employment opportunities, especially for small-scale fish
farmers.
356
Critically, the report recognizes that while the growth of aqua-
culture presents opportunities, it also presents challenges if it is not
managed and pushed to develop in environmentally and socially sustain-
able ways.
357
Innovation plays a key role in how Bangladesh sees aquaculture
developing in a beneficial way. For example, Bangladesh intends to “de-
velop[] low-cost aquaculture technologies,” “improv[e] hatchery manage-
produce more aquaculture patents (although the overall rate of patent activity in the latter
countries is much lower). Id.
351. State of World Fisheries 2016, supra note 187, at 26.
352. Ministers Restate Aquaculture Importance and Canadian Market Expansion, Fish Info.
& Servs. (June 23, 2016), http://fis.com/fis/worldnews/worldnews.asp?l=e&ndb=1&id=85277
[http://perma.cc/6AHZ-HBY9].
353. Canadian Council of Fisheries & Aquaculture Ministers, Aquaculture Development
Strategy 2016–2019, at 3 (2016), http://waves-vagues.dfo-mpo.gc.ca/Library/365376.pdf
[http://perma.cc/WA8G-JXGH].
354. Ministry of Fisheries & Livestock, Gov’t of the People’s Republic of Bangl. & UN
Food & Agric. Org., National Aquaculture Development Strategy and Action Plan of
Bangladesh 2013–2020 (2014), http://www.fao.org/3/a-i3903e.pdf [http://perma.cc/JZV9-
AF84].
355. Id. at vii.
356. Id. at 2.
357. See id. at 1.
552 COLUMBIA LAW REVIEW [Vol. 118:491
ment practices and genetic quality of culture fish species,” “strengthen[]
research and development,” and “enhanc[e] commercial aquaculture
productivity under a public--private partnership.”
358
The explicit purpose
of the plan is to guide “public investments in development and support
services [for aquaculture] and encourag[e] private investment in aqua-
culture enterprises.”
359
Despite these ambitions, government support for aquaculture is still
dwarfed by government support for wild fisheries. Like fossil fuel
subsidies, subsidies for capture fisheries are about a century old. Major
fishing nations such as Norway introduced fisheries subsidies as early as
the 1920s as part of their industrialization policies.
360
Subsidies became
more widespread in the 1930s and 1940s when they aimed to encourage
investment and modernization in the fishing industry.
361
Over the next
several decades, fisheries subsidies spurred improvements in vessel and
gear design, increased vessel capacity, and led to improvements in
preservation methods, thereby allowing vessels to range farther out to sea
to catch fish.
362
By 1992, however, the FAO sounded the alarm: Fisheries subsidies
were leading to dangerous levels of overfishing, putting the world’s fish
stocks at risk of extinction.
363
The FAO initially estimated global fisheries
subsidies at approximately $54 billion per year, a number that has proven
to be too high, even adjusting for inflation.
364
A more recent estimate
from the European Parliament in 2013 put global fisheries subsidies at
$35 billion annually in 2009.
365
Of that, $20 billion are “capacity-
enhancing subsidies”—subsidies that directly increase the global fish
catch.
366
Other subsidies are either ambiguous in their effects on fishing
practices—such as social security programs for fishermen—or may lead
to more sustainable fishing practices—such as subsidies for research into
358. Id. at 5.
359. Id. at 2.
360. UN Env’t Programme, Fisheries Subsidies, Sustainable Development and the
WTO 115–16 (Anja von Moltke ed., 2011).
361. See William E. Schrank, UN Food & Agric. Org., Introducing Fisheries Subsidies 15,
18, 20–22 (2003), ftp://ftp.fao.org/docrep/fao/006/y4647e/Y4647e00.pdf [http://perma.cc/
H2HH-8RMX] (discussing fisheries subsidies introduced by the United States, Canada,
Norway, and Iceland).
362. See UN Food & Agric. Org., Marine Fisheries and the Law of the Sea: A Decade
of Change 1, 4–5, 21–24 (1992), ftp://ftp.fao.org/docrep/fao/009/u9345e/u9345e00.pdf
[http://perma.cc/UM32-CF38].
363. See id. at 6–7.
364. Id.; U. Rashid Sumaila et al., Directorate-Gen. for Internal Policies, Eur. Parliament,
Global Fisheries Subsidie s 11 (2013), http://www.europarl.europa.eu/RegData/etudes/note/
join/2013/513978/IPOL-PECH_N T(2013)513978_EN.pdf [http://perma.cc/VW35-QD7C].
365. Sumaila et al., supra note 364, at 27.
366. Id.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 553
best management practices or vessel decommissioning.
367
The largest
subsidizing countries in the world are, in descending order, Japan,
China, the United States, Russia, and Micronesia.
368
Except for those in
the United States, the great maj ority of each country’s subsidies are
capacity enhancing.
369
Just as with fossil fuels, trade cases—in particular trade remedies that
target government support without the need to bring a WTO case first—
have resulted in withdrawn support for aquaculture. Most recently,
Turkey agreed to withdraw subsidies for farmed sea bass and sea
bream.
370
The European Commission initiated an antisubsidies investiga-
tion against Turkish sea bass and sea bream on August 14, 2015.
371
Following consultations between the Commission and the Turkish gov-
ernment, Turkey announced in May 2016 that it was canceling its
subsidies retroactive to January 1, 2016.
372
In response, the Spanish trade
organization that initially sought the investigation withdrew its complaint
and the Commission dropped the investigation.
373
Notably, the revoked
subsidies include direct subsidie s for the organic farming of sea bass, the
development of which would enhance the health benefits flowing from
the fish trade.
374
As another example, Vietnam’s catfish farms showcase all three
effects: litigation costs, liability, and lost investment. As part of normaliz-
ing its relations after the Vietnam War, the United States lifted an
embargo on Vietnamese products in 1994.
375
Catfish farming quickly
became a major source of economic livelihood, especially in the Mekong
367. Id. at 22, 25, 30. Interestingly, the European Parliament estimates that 22% of
fisheries subsidies are also energy subsidies in the form of fuel subsidies for vessels. Id. at
27.
368. Id. at 31–32.
369. Id.
370. See Commission Implementing Decision 2016/1360 of Aug. 8, 2016, Terminating
the Anti-Subsidy Proceeding Concerning Imports of European Sea Bass and Gilthead Sea
Bream Originating in Turkey, 2016 O.J. (L 215) 31, 32 (EU) [hereinafter Turkey Bass and
Bream Decision]; see also EC Puts End to Turkish Seabream and Seabass Import Dispute,
Fish Info. & Servs. (Aug. 11, 2016), http://fis.com/ fis/worldnews/worldnews.as p?
monthyear=8 -. 20 16&day=11 &i d=862 65& l= e&country=0&speci al =&ndb=1& df=0 [http://
perma.cc/2A8N-HNN7] (noting Turkey’s decision to terminate its main subsidy program).
371. Turkey Bass and Bream Decision, supra note 370, para. 1.
372. Id. para. 8.
373. Id. paras. 9–10.
374. See Turkish Bass and Bream Notice, supra note 172, at 4 (describing the
subsidies as “[d]irect transfer[s] of funds . . . for the organic production of sea bass and
sea bream”).
375. See Irene Brambilla, Guido Porto & Alessandro Tarozzi, Adjusting to Trade
Policy: Evidence from U.S. Antidumping Duties on Vietnamese Catfish, 94 Rev. Econ. &
Stat. 304, 304–06 (2012) (describing the exportation of Vietnamese catfish to the United
States after the termination of the latter’s embargo).
554 COLUMBIA LAW REVIEW [Vol. 118:491
Delta.
376
By 2002, Vietnamese producers exported 50% of their catfish to
the United States and had almost 20% of the U.S. catfish market.
377
The
Association of Catfish Farmers of America sought protection from the
U.S. government, first in the form of labeling measures and then in the
form of antidumping duties.
378
The U.S. government imposed antidump-
ing duties in the summer of 2003, justified in part on the grounds that
Vietnamese catfish sold at artificially low prices due to Vietnamese gov-
ernment subsidies.
379
By the end of 2003, Vietnamese catfish exports to the United States
had dropped by 85% from 2002.
380
The loss of market share owing to
higher duties clearly illustrates the liability effects flowing from the appli-
cation of trade remedies. But Vietnam’s experience also illustrates the
effects of litigation costs and lost investment as well. On the one hand,
Vietnamese producers struggled to provide the information required in
an antidumping investigation, including information about labor costs
and sales contracts, which must be provided on English-language
forms.
381
Equally importantly, the U.S. antidumping duties caused signifi-
cant diversion of investment away from catfish production in Vietnam. A
recent study estimated the declines in investment in catfish aquaculture
to be between 28% and 62%, depending on the producer’s exposure to
the U.S. market.
382
Such cuts in investment are crippling to the
development of a sustainable aquaculture industry that can meet the
needs of global food production. Little reason exists to make long-term
investments in improving aquaculture practices when market access
hinges on the decisions of U.S. antidumping authorities. Meanwhile, with
no challenges to Vietnam’s substantial subsidies for its fishing fleets,
Vietnam and its fish exporters might reasonably divert their investment
to capturing wild fish. U.S. antidumping actions, in other words,
reinforce the place of Vietnamese capture fisheries at the expense of its
aquaculture industry.
376. See id. (describing the impact of trade with the United States on Mekong Delta
producers).
377. Id. at 305.
378. See id. at 306 (describing American catfish producers’ efforts to restrict the use
of the label “catfish” to U.S. subspecies and a subsequent lawsuit against Vietnam).
379. See David Lamb, U.S., Vietnam in Dispute over Catfish Exports, L.A. Times (Dec. 8,
2002), http://articles.latimes .com/2002/dec/08/world/fg-catfish8 [http://perma.cc/ M4MH-
CP9M] (“The ruling appears to support the U.S. catfish farmers’ contention that Mekong Delta
farmers sell their catfish at artificially low prices because of government subsid ies. ”).
380. See Brambilla et al., supra note 375, at 306 (showing that monthly Vietnamese
catfish imports dropped from nearly 380 tons in 2002 to 56 tons in late 2003).
381. See Do Thanh Cong, Catfish, Shrimp, and the WTO: Vietnam Loses Its
Innocence, 43 Vand. J. Transnat’l L. 1235, 1250 (2010) (“Many Vietnamese exporters
found it difficult to understand the [antidumping] questionnaires because they are com-
plicated and in English . . . .”).
382. Brambilla et al., supra note 375, at 317.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 555
* * *
Consumption of energy and fish are central to the global economy,
among the most highly traded commodities in the world. In both sectors,
existing consumption relies too heav ily on natural resources. Providing
alternatives that meet the demand for energy and fish in a sustainable
way is imperative. In both sectors, governments and researchers have
confirmed over and over again the central role of investment in innova-
tion. Yet as the evidence here shows, selective enforcement has consist -
ently undermined natural resource substitutes. Producers in developing
countries have struggled with the burden of defending themselves in
trade actions in the United States and Europe. The imposition of trade
remedies has closed markets and threatened to shutter entire industries,
such as the Argentinian biofuel or Vietnamese catfish farming sectors.
And these trade remedies have resulted in lost investment in almost every
case. With no similar action nor costs imposed on them, the fossil fuel
and wild fisheries industries win big.
V.
REFORMING TRADE LAW ENFORCEMENT
Fixing selective enforcement is imperative if we are to have a fair
trade policy, in the sense of a trade policy that does not undermine core
noncommercial values. Yet selective enforcement arises in part because
of the way in which the WTO is structured. The WTO enforcement pro-
cess is akin to a system of private attorneys general. Each nation brings
claims when it believes its industries have been hurt, but no centralized
enforcement system exists. Industries affected by a foreign government’s
laws can lobby their government to impose trade remedies. Only some
industries will lobby successfully. Due to resource and time constraints,
governments cannot bring a trade case every time an industry is hurt.
383
Together, differences in domestic political power and resource con-
straints contribute to selective enforcement.
Selective enforcement is not necessarily problematic. Selective
enforcement becomes unfair only when it stacks the deck against prod-
ucts that create broader social benefits. This Part presents two proposals
for reformi ng the WTO enforcement process to reduce this effect: (1)
creating a centralized enforcement procedure for environmental prod-
ucts, and (2) reforming trade remedies investigations. In both cases, the
goal of reform is to address selective enforcement of trade obligations by
increasing enforcement. In other words, member states should look for
ways to ratchet enf orcement up, rather than down.
383. Moreover, many trade law violations or unfair practices will create both winners
and losers in other countries. For example, energy-intensive industries might be opposed
to cases challenging fossil fuel subsidies, while renewable energy companies might favor
such a challenge. Whether the government chooses to bring a case depends on which side
the government intends to take.
556 COLUMBIA LAW REVIEW [Vol. 118:491
A. Reforming the WTO Enforcement Process
The WTO should consider creating a centralized enforcement pro-
cess. The cornerstone of this process would involve the WTO Secretariat
identifying products that are similarly situated to products targeted by
WTO dispute settlement or trade remedies. In a strong version, a WTO
prosecutor could be empowered to bring cases to remove the pernicious
effects of selective enforcement. In a weaker version, the list of similarly
situated products would be circulated to WTO members. Significantly, in
identifying similarly situated products, officials should use a test that
focuses on competition in the marketplace, rather than the narrower
“like products” test common in trade law.
The development of the list of similarly situated products would
follow a two-step process. First, when a WTO member prevails in a dis-
pute before the DSB or notifies the WTO that it has levied antidumping
or countervailing duties, the WTO Secretariat would identify products
that compete with the product at issue in the dispute.
384
For example, if
this process had been in place following the Canada—Renewables case,
officials would have looked for products that compete with solar panels,
such as wind energy or fossil fuels. In theory, this exercise could be done
for all disputes. A more efficient system, however, would require the
Secretariat to undertake this task upon the request of a single member.
In this way, the request to develop a list of similarly situated products
would be akin to the request to form a panel: A single nation could
initiate it.
Significantly, officials should not apply the ordinary WTO “like-
products” test. Such a test unduly privileges a variety of extraneous fac-
tors, such as the physical composition of two products or their tariff
classifications.
385
Instead, officials should focus on whether two products
are substitutes within the marketplace. In conducting this analysis, offi-
cials should emp loy a test like the “relevant market” analysis used in
antitrust law.
386
The relevant market includes all products that are
“reasonably interchangeable by consumers for the same purposes.”
387
384. Antidumping and countervailing-duty investigations are not, of course, WTO
disputes unless a member state challenges their imposition. However, because WTO
members use antidumping and countervailing-duty investigations to create protectionism
and their imposition can create the same kind of harmful effects for competitive products
as a WTO dispute, the centralized enforcement process should include both. Antidump-
ing and countervailing-duty investigations are already subject to WTO oversight through
both notification requirements and the DSU, so including them within the scope of the
centralized enforcement process does not expand the WTO’s reach.
385. See, e.g., Japan—Alcohol, supra note 238 (discussing the factors used in a like-
products analysis).
386. See, e.g., United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 395
(1956) (setting out the test for relevant market analysis).
387. Id.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 557
Cross-elasticities of demand are used to mark out the boundaries of rele-
vant markets. The EU uses a similar approach to market definition:
“identify[ing] the competitors of the undertakings concerned by a par-
ticular case that are capable of constraining their behavior.”
388
Indeed,
the EU applies this methodology even in the context of EU antisubsidy
law, known as “state aid.”
389
Competition agencies throughout the
world—such as the Federal Trade Commission or Department of Justice
in the United States, or the European Commission in the EU—are
familiar with this basic inquiry, suggesting that the WTO Secretariat
could credibly perform this task without significant difficulty.
Second, after defining the universe of relevant products, the
Secretariat would identify which products in the relevant market benefit
from the same conduct that either the WTO found unlawful or a trade
remedy investigation targeted. Similarly situated products are not, after
all, any products that benefit from an enforcement action. An unsubsi-
dized wind farm, for instance, should benefit from the removal of subsi-
dies on solar panels in response to a DSB ruling. Returning to the
Canada—Renewables example, the Secretariat would ask which of the
products that compete with solar panels, identified at step one, also
benefit from local content requirements (the measure found unlawful).
The result would be a list of identified measures that the Secretariat
has preliminarily determined both violate WTO rules and affect the
competitive conditions for the product subject to the original dispute.
Having compiled the list, what should the Secretariat do with it? Here,
one can imagine a weak version and a strong version of the enforcement
process. In the weak version, the Secretariat would circulate the list of
identified measures to all WTO members.
390
At that point, its involve-
ment would end. Individual member states could then consider whether
388. Mario Monti, European Comm’r for Competition Policy, Address at the
Workshop on Market Definition at the Helsinki Fair Centre: Market Definition as a
Cornerstone of EU Competition Policy (Oct. 5, 2001), http://europa.eu/rapid/press-
release_SPEECH-01-439_en.htm?locale=en [http://perma.cc/YY43-N74L].
389. See generally Leo Sleuwaegen, European Comm’n, Competitive Distortions and
State Aid to Firms. How to Define the Relevant Market? (1999), http://ec.europa.eu/
growth/content/competitive-distortions-and-state-aid-firms-how-define-relevant-market-0_
en (on file with the Columbia Law Review) (discussing the EU’s use of antitrust market
definition methods in the context of state aid).
390. Others have called for similar kinds of transparency-based measures to
compensate for underenforcement at the WTO. See Chad P. Bown & Bernard M.
Hoekman, Developing Countries and Enforcement of Trade Agreements: Why Dispute
Settlement Is Not Enough (World Bank Dev. Research Grp., Policy Research Working
Paper No. 4450, 2007), http://dx.doi.org/10.1596/1813-9450-4450 (on file with the
Columbia Law Review).
558 COLUMBIA LAW REVIEW [Vol. 118:491
to initiate further proceedings challenging any of the identified
measures.
391
These proceedings could, of course, include a formal complaint
through the DSB. Bu t the proceedings could also take less adversarial
forms. WTO member states organize themselves into committees that
correspond to each of the WTO agreements, such as the Committee on
Subsidies and Countervailing Measures. These committees serve as party-
led forums for informally resolving disputes. In particular, members can
question each other’s practices through the committees, and the chal-
lenged member has the opportunity to respond to those questions. India,
for example, posed questions to the United States about certain state and
local renewable energy subsidies in the Committee on Subsidies and
Countervailing Measures and the Committee on Trade-Related
Investment Measures.
392
This weak version of the enforcement process preserves the funda-
mentally party-driven nature of WTO dispute settlement. The Secretariat
would provide a public good to members in the form of information.
This service would be especially valuable to the majority of smaller mem-
bers that lack the resources to conduct th is kind of inquiry themselves
but might nevertheless be interested in the result. In this sense, the weak
version is very similar to the Advisory Centre on WTO Law created by
members to address selective enforcement against weak or capacity-
constrained states.
393
It tries to level up enforcement and participation in
WTO dispute settlement by easing the burdens of participation.
Members themselves would still have to choose to act on this
information. As a consequence, WTO dispute settlement would retain a
diplomatic character, with both politics and relationships playing a large
391. This process is “weak” precisely because it leaves open the possibility that states
would do nothing at this stage. States may be captured by, for instance, their fossil fuel
industries in a way that drives them to use enforcement as an implicit subsidy for fossil
fuels (and a weapon against renewable energy). The weak enforcement does not prevent
this outcome. It merely creates public information that can encourage nations to take
action. Such action could result simply from possessing knowledge about the effects of
enforcement policies or from lobbying by other organizations responding to the list of
similarly situated products.
392. Committee on Subsidies and Countervailing Measures, Minutes of the Regular
Meeting Held on 22 April 2013, paras. 116–125, WTO Doc. G/SCM/M/85 (Aug. 5, 2013)
(stating questions posed by India to the United States under Article 25.8 of the Agreement
on Subsidies and Countervailing Measures); Committee on Trade-Related Investment
Measures, Certain Local Content Requirements in Some of the Renewable Energy Sector
Programs, Questions by India to the United States, para. 1, WTO Doc. G/TRIMS/W/117
(Apr. 17, 2013) (stating that some renewable energy programs in the United States “make
the availability of incentives contingent upon the use of domestic or state specific
products, which raises concerns about their compatibility with . . . Article 2 of the TRIMs
Agreement read with Article III:4 of GATT 1994”).
393. See supra Part I.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 559
role in determining whether and how states address identified measures.
This feature makes the weak form of centralization more politically
feasible. It is also more cons istent with a view of the WTO in which the
agreements are contracts among parties. Whether the parties to a
contract enforce their rights is, at the end of the day, up to them.
The strong version of this enforcement process would call for a
prosecutor’s office within the Secretariat with the authority to initiate
WTO disputes challenging identified measures.
394
Such a mechanism
would remove the political filter that prevents some meritorious cases
from being brought. As lawyer and economist Claus Zimmermann has
argued, leaving dispute initiation in the hands of governments sits
uneasily with the theory underlying free trade.
395
Trade agreements aim
to tie domestic political actors’ hands by giving them a long-run incentive
to reduce trade barriers. Putting enforcement in the hands of govern-
ments effectively “untie[s]” governments’ hands by allowing violations to
go unpunished, resulting in trade barriers for foreign exports and higher
prices for domestic consumers.
396
The prosecutor’s mandate would be limited to addressing identified
similarly situated measures. Hence, the prosecutor would not have the
authority to investigate just any potential violation of WTO law. The of-
fice’s focus would be on ensuring that the normal operation of the DSU
does not distort the development of socially beneficial products. In this
sense, the prosecutor would supplement the state-driven dispute settle-
ment system, rather than replace it.
Several additional safeguards could also limit the possibility of over-
reach by the prosecutor. First, as part of bringing a case the prosecutor
could be required to demonstrate harm to the developme nt of socially
beneficial products in the absence of the case. For instance, before bring-
ing a case against a local content requirement for fossil fuels, the prose-
cutor would have to show that failing to do so would harm renewable
energy products benefitting from local content requirements. This
requirement that the prosecutor demonstrate harm is a departure from
the norm in most WTO cases, in which “nullification and impairment”
(trade speak for injury) is presumed.
397
Consider again the Canada—Renewables example.
398
Recall that there
the DSB adopted reports finding that Ontario’s Feed-in Tariff Program
discriminated against foreign producers of renewable energy equipment
because, to qualify for the program, electricity generators had to
394. See Claus D. Zimmermann, Rethinking the Right to Initiate WTO Dispute
Settlement Proceedings, 45 J. World Trade 1057, 1068–69 (2011).
395. Id. at 1062–66.
396. Id. at 1065 (internal quotation marks omitted).
397. DSU, supra note 54, art. 3.8.
398. See supra notes 109–111, 298–304.
560 COLUMBIA LAW REVIEW [Vol. 118:491
purchase locally produced renewable energy equipment, a local content
requirement.
399
The Secretariat would therefore look to see whether
fossil fuels or other forms of renewable energy available in Ontario also
benefit from local content requirements. In each example it identified,
the Secretariat would make a preliminary determination as to whether
the allegedly unlawful measure is sufficiently similar to the measure
found illegal by the WTO, and hence illegal itself. This determination
would be based upon an unbiased analysis of both the similarities and
the differences between the two measures. Moreover, the Secretariat
would investigate whether those benefits harmed the competitive
opportunities in Ontario for solar panels, the primary type of renewable
energy equipment at issue in Canada—Renewables. The goal, of course, is
to ensure that solar panels are not disadvantaged in the marketplace
because they happened to be the target of a dispute, while other
products with which solar panels compete continue to receive and
benefit from unlawful measures.
Second, a pretrial chamber could be created to evaluate the merits
of disputes that the prosecutor wishes to initiate. The pretrial chamber
would authorize the prosecutor to initiate a dispute upon a preliminary
showing that the identified measure is both inconsistent with WTO rules
and affects the competitive conditions for similarly situated products
involved in other disputes. Absent such authorization, the prosecutor
could not initiate a dispute. The initiation of a dispute would also be sub-
ject to the DSU ’ s ordinary reverse consensus rule. In other words, the
prosecutor would notify member states of her intention to initiate a dis-
pute. Member states could block the prosecutor from proceeding by
consensus, just as they can block the ordinary operation of the DSU only
through consensus.
400
Finally, the WTO’s system of retaliation would also operate as a
check on the prosecutor. Under ordinary WTO rules, sanctions for viola-
tions are not imposed by the WTO. They are, rather, imposed by individ-
ual member states after receiving WTO authorization.
401
The creation of
a prosecutor would not change that. The prosecutor would have no
independent ability to seek or impose sanctions against a respondent
state that refused to comply with an adverse decision of the DSB. If the
respondent did not remove the unlawful measure, a member state would
have to come forward and seek authorization to retaliate on the basis of
the decision. The state seeking authorization to retaliate would not have
to relitigate the legality of the measure, though. In this way, the prosecu-
399. See Canada—Renewables Appellate Body Report, supra note 14, para. 6.
400. See, e.g., DSU, supra note 54, art. 17.14 (“An Appellate Body report shall be
adopted by the DSB and unconditionally accepted by the parties to the dispute unless the
DSB decides by consensus not to adopt the Appellate Body report . . . .”).
401. See supra Part I.
2018] FREE TRADE AND SELECTIVE ENFORCEMENT 561
tor provides a public good to members by establishing that a nation’s
measures violate a WTO obligation. That finding alone would subject the
member state to reputational sanctions.
402
But the reciprocal suspension
of trade concessions—the backbone of the WTO’s relatively effective
enforcement procedures—would remain subje ct to states’ political and
diplomatic calculations.
To be sure, the prosecutor’s office would still face the capacity con-
straints common to prosecutors in domestic systems. There would thus
be an element of prosecutorial discretion in selecting investigations to
pursue. But even with these capacity constraints, selective enforcement
would still decline. A prosecutor’s office would also offset the capacity
constraints that limit the ability of developing countries to pursue
potentially mer itorious claims.
403
Recent criticism of the DSB, especially from the United States, has
focused on claims that the DSB has overstepped its mandate.
404
This
criticism, although not necessarily shared widely by WTO members, likely
means that the creation of a prosecutor’s office within the WTO is not
politically viable. Still, other international dispute resolution bodies, most
notably the International Criminal Court, have prosecutors that are em-
powered to initiate investigations and, subject to limitations, disputes.
405
The existence of prosecutors in international law in general suggests that
even if the creation of one is ill-advised or unlikely now, members might
come to view one more favorably in the future.
B. Reforming Trade Remedy Investigations
Reforming antidumping and countervailing-duties law would also
reduce the pernicious effects of selective enforcement. As Part II demon-
strates, selective enforcement against environmentally beneficial prod-
ucts relies primarily on trade remedy investigations.
406
Consequently,
limiting the role of trade remedies investigations would curtail the most
402. See generally Andrew T. Guzman, How International Law Works: A Rational
Choice Theory (2008) (setting forth a reputational theory of international law).
403. See generally Guzman & Simmons, supra note 53, at 583–88, 591–92 (showing
that capacity constraints explain the pattern of WTO disputes better than power-based
arguments).
404. Statement by th e U nited States at the WTO Dispute Settlement Body ’s First
“Dedicated Session” on the Issue of Reappointments of Appellate Body Members (S ept.
26, 2016), http://geneva.usmission.gov/wp- co ntent/uploads/2016/09/US.S tm t_.DSB_.
Dedicated.Session.26Sep16.pdf [http://perma.cc/V68J-PMHX].
405. Rome Statute of the International Criminal Court art. 15, opened for signature
July 17, 1998, 2187 U.N.T.S. 90 (entered into force July 1, 2002).
406. See supra Part II.
562 COLUMBIA LAW REVIEW [Vol. 118:491
prevalent tool of selective enforcement.
407
However, proposed trade rem-
edy reforms—which tend to focus on reducing trade remedies actions—
are both infeasible politically and could eliminate the valuable role trade
remedies play in the trade system. Consequently, any trade remedy re-
forms aimed at reducing selective enforcement should focus on ensuring
evenhanded enforcement.
Over the years, many commentators have called for trade remedies
reform.
408
The general argument for reform is two-fold. As Nobel Prize--
winning economist Paul Krugman and Maurice Obstfeld have noted, the
economic theory underlying trade liberalization does not support anti-
dumping laws, the far more commonly used trade remedy.
409
Price
discrimination—the essence of what antidumping laws forbid—“may be a
perfectly legitimate business strategy . . . . A firm may well be willing to
sell a product for a loss while it is lowering its costs through experience
or breaking into a new market.”
410
Moreover, as Professor Maurizio
Zanardi writes, “nowadays [antidumping laws are] widely recognised as a
successful form of protectionism that basically lost any connection with
dumping.”
411
Most commonly, governments accomplish this protectionist
objective by massaging the data used to calculate dumping margins.
Recall that dumping occurs when the price charged in the importing
country is less than “normal value,” which is usually the price charged in
the exporting country.
412
As mentioned above, governments have figured
out a variety of techniques to increase “normal value” so that dumping is
407. See Wu, supra note 269, at 2 (arguing that “[d]eclaring certain types of subsidies
to be nonactionable would be one mechanism to safeguard against the potential of the
negative impact of CVDs”).
408. See, e.g., Jean-Marc Leclerc, Reforming Anti-Dumping Law: Balancing the
Interests of Consumers and Domestic Industries, 44 McGill L.J. 111, 122–25, 138–40
(1999) (“Through incremental changes in regional trade agreements, countries like
Canada will increasingly realize that national economies (and consumers in particular)
benefit from dumping.”); Zheng, supra note 225, at 181–91 (proposing to “replace
antidumping with a country-specific safeguard equipped with a heightened injury standard
and a mandatory public interest clause”); see also André Sapir, Some Ideas fo r Reforming
the Community Anti-Dumping Instrument 2–6 (2006), http://core. ac.uk/download/
files/213/5081012.pdf [http://perma.cc/8JZK-7ATS] (detailing various trade remedy
reforms, including reforming the Community interest clause, increasing the transparency
of antidumping measures and proceedings, and shifting the focus of antidumping cases
from protecting consumers to fostering competition).
409. Paul R. Krugman & Maurice Obstfeld, International Economics: Theory and
Policy 131–36 (7th ed. 2006) (“Economists have never been very happy with the idea of
singling dumping out as a prohibited practice. For one thing, price discrimination
between markets may be a perfectly legitimate business strategy . . . . Also, the legal
definition of dumping deviates substantially from the economic definition.”).
410. Id. at 134.
411. Maurizio Zanardi, Anti-Dumping: What Are the Numbers to Discuss at Doha?, 27
World Econ. 403, 403–04 (2004).
412. GATT, supra note 36, art. VI.
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 563
easier to find.
413
One common technique is to use a “fair” price, rather
than the price a producer actually charges, in order to figure out
whether a producer dumps its goods.
414
That price is usually higher than
what the producer actually charges in its own country, making it easier to
demonstrate dumping.
Some have also worried that the language of fairness in antidumping
disputes increases pressure on governments to bring cases. Trade policy
analyst Simon Lester, for example, has argued that “[t]he constant
accusations of ‘unfair trade’ have convinced domestic groups around the
world that foreigners are cheating them in one nefarious way or
another.”
415
This perception of unfairness leads to a breakdown in trust.
Indeed, as economist Chad Bown has argued, antidumping investigations
have the flavor of “vigilante justice,” with countries increasingly electing
to retaliate against each other using antidumping investigations rather
than the WTO’s multilateral system.
416
The primary argument in favor of trade remedies holds that they are
a necessary safety valve for the trading system. As Michael Punke and
Timothy Reif—the U.S. Ambassador to the WTO and the U.S. Trade
Representative General Counsel, respectively—put it, “[w]ithout [anti -
dumping and countervailing-duty laws], support for trade liberalisation
would disappear altogether.”
417
The idea is that governments face pres-
sure from well-organized domestic groups to impose protectionism.
Government officials will therefore not agree to trade agreements, know-
ing they will be punished politically for liberalizing trade, unless they
have the ability to impose protectionist barriers to trade in response to
specific lobbying demands.
418
On this theory, protectionist rules are a
413. Zeroing involves dividing a product into subproducts and calculating the
dumping margins on the subproducts. The dumping margins on the subproducts are then
added together to get an overall dumping margin. The trick is that subproducts with
negative dumping margins (that is, those that are not being dumped) are rounded to
zero, an act which pushes the overall dumping margin higher. See supra note 195.
414. Krugman & Obstfeld, supra note 409, at 134.
415. Simon Lester, Trade Remedies vs. Trade Liberalization, Int’l Econ. Law & Policy
Blog (June 20, 2016), http://worldtradelaw.typepad.com/ielpblog/2016/06/trade-
remedies-vs-trade-liberalization.html [http://perma.cc/6NFP-KE2V]; see also Bruce A.
Blonigen & Thomas J. Prusa, Antidumping, in 1 Handbook of International Trade 251 (E.
Kwan Choi & James Harrigan eds., 2003) (discussing the disparity between “the fair trade
rhetoric stressed by [antidumping’s] supporters” and the practical effects of antidumping
policies).
416. Bown, Trade Remedies, supra note 209, at 524.
417. Michael Punke & Tim Reif, Letter to the Editor, Problem of Over-Reach by
Appellate Body Decisions Has Become More Serious, Fin. Times (June 5, 2016),
http://www.ft.com/content/654de53a-28ef-11e6-8ba3-cdd781d02d89?mhq5j=e7 (on file
with the Columbia Law Review).
418. See Sykes, supra note 227, at 275 (“Ultimately, well-organized groups—those
most adept at lobbying and most capable of ‘paying’ for policy initiatives—will have their
564 COLUMBIA LAW REVIEW [Vol. 118:491
second best, but they actually increase the gains from liberalizing trade
by making trade agreements possible in the first place.
419
Given their role as a safety valve, doing away with antidumping and
countervailing-duty investigations is neither possible nor, indeed, neces-
sarily advisable. Instead, proposals should focus on reforming the
requirements for the findings governments must make before imposing
trade remedies. For example, trade remedy investigations might be
required to focus on the collateral consequences of imposing trade rem-
edies, rather than on only whether the “unfair” trade practice injures a
domestic entity. Consumers benefit, after all, from dumped or subsidized
goods. The only time they do not benefit is when the dumped or subsi-
dized goods force competitors out of business and lead to monopoly
prices.
420
This, in turn, can happen only when barriers to entry prevent
competition from reemerging. A focus on competition, rather than dis-
criminatory pricing or subsidies, would thus allow the continuation of
antidumping and countervailing-duty investigations, but would target
them at behavior that actually reduces the welfare gained from liberal-
ized trade.
421
Transparency measures, such as the weak version of
centralized enforcement proposed above, would also deter some of the
most egregious uses of trade remedies.
CONCLUSION
We find ourselves at a unique moment in the history of international
relations. The neoliberal consensus that has, since the end of World War
II, pushed countries to reduce trade barriers ever further has cracked
and may be crumbling. The question of what a fair trade policy should
look like—what noncommercial values trade law should protect and how
it should do so—is very much on the table.
Addressing the market distortions that selective enforcement creates
must be part of the answer. Free trade agreements are supposed to open
markets to competition. The great irony is that the process through
which these rules are enforced can have the opposite effect. While sub-
interests vindicated [through elected officials], while diffuse, poorly organized interest
groups may suffer.”).
419. See id. at 276–77 (“[A]n industry can gain from protection in good times as well
as in bad times, as the exclusion of imports under any circumstances allows profits and
employment in the protected industry to rise.”).
420. See Sapir, supra note 408, at 2 (“[D]umping can be viewed as detrimental to the
importing country . . . [including the] practice [of] ‘predatory or strategic dumping,’
setting low export prices in order to drive out competitors and then imposing high
monopoly prices in the importing country.”).
421. See Bernard M. Hoekman & Petros C. Mavroidis, Dumping, Antidumping, and
Antitrust, 30 J. World Trade 27, 27–29 (1996) (detailing how a competition-focused policy
“might help to defuse both market-access-related disputes and limit the use of
antidumping actions”).
2018] FREE TRADE AND SELECTIVE ENFORCEMEN T 565
stantive trade rules promote competition, government enforcement poli-
cies curtail it. Worse, they do so precisely for those products that have the
largest social benefits—environmentally sustainable products that could
reduce the burden imposed by natural resource–intensive industries.
This Article has set the table for further research into the effects of
selective enforcement. It has focused primarily on the effects of selective
enforcement on markets. Future research should focus on identifying
selective enforcement’s causes. Natural resource–intensive industries
predate trade liberalization in most countries. Fishing and drilli ng for
oil, for instance, are practices that long predate the GATT. It is possible
that government subsidies for these sectors are thus baked into
investment-backed expectations. Government support for these sectors
thus does not spur anyone to lobby for trade enforcement because no
one in the industry ever expected to rely on trade rules. Renewable
energy and fish farming, however, came along after trade law was estab-
lished. Government support in these sectors may well disturb
expectations established through the GATT and WTO.
Similarly, future research should look for other sectors of the
economy where we observe similar patterns of selective enforcement, and
for other laws that are selectively enforced. Monitoring selective
enforcement will be especially important as trade litigation challenging
health and safety measures, as well as consumer pr otection measures,
continues to increase. These measures are frequently challenged under
complicated agreements like the WTO’s Agreement on Technical
Barriers to Trade or the Agreement on Sanitary and Phytosanitary
Measures. Like rules on government support, the technical nature of
rules on health, safety, and consumer protection measures could make
them ripe for exploitation by the forces of selective enforcement.
Most importantly, though, governments should look at ways to make
enforcement more evenhanded across products that compete with each
other. President Trump has repeatedly called for greater enforcement of
trade laws,
422
a call that has been echoed, if in less bellicose terms, from
quarters as diverse as the European Union and China.
423
This consensus
on the need for more enforcement provides the political will to address
the distortions caused by enforcement policies. A global trade prosecut or
may not be in governments’ interests today, but a multilateral process to
coordinate enforcement actions would go a long way toward rebuilding
the trade regime’s legitimacy. As Hunter S. Thompson once said, “We
422. See supra note 1 and accompanying text.
423. China Says U.S. Trade Orders Should Respect International Rules, Reuters (Apr. 12, 2017),
http://www.reuters.com/article/us-china-usa/china-says-u-s-trade-orders-should-respect-
international-rules-idUSKBN17402C [http://perma.cc/RU37-ABJB]; Commission Proposes
Improved Rules to Enforce EU Rights Under International Trade Agreements, European
Comm’n (Dec. 18, 2012), http://trade.ec.europa.eu/doclib/press/index.cfm?id=856 [http://
perma.cc/8XRJ-77N6].
566 COLUMBIA LAW REVIEW [Vol. 118:491
cannot expect people to have respect for law and order until we teach
respect to those we have entrusted to enforce those laws.”
424
424. Hunter S. Thompson: In His Own Words, Guardian (Feb. 21, 2005),
http://www.theguardian.com/books/2005/feb/21/huntersthompson [http://perma.cc/
558Q-MMCK].
